Upper Bounds on Numerical Approximation Errors

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Upper Bounds on Numerical Approximation Errors

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Title: Upper Bounds on Numerical Approximation Errors
Author: Raahauge, Peter
Abstract: This paper suggests a method for determining rigorous upper bounds on approximation errors of numerical solutions to infinite horizon dynamic programming models. Bounds are provided for approximations of the value function and the policy function as well as the derivatives of the value function. The bounds apply to more general problems than existing bounding methods do. For instance, since strict concavity is not required, linear models and piecewise linear approximations can be dealt with. Despite the generality, the bounds perform well in comparison with existing methods even when applied to approximations of a standard (strictly concave) growth model. KEYWORDS: Numerical approximation errors, Bellman contractions, Error bounds
URI: http://hdl.handle.net/10398/7171
Date: 2004-09-15

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