Control theory heuristics for improving the behavior of economic models
In: System dynamics review: the journal of the System Dynamics Society, Volume 5, Issue 2, p. 130-147
ISSN: 1099-1727
AbstractThe usefulness of control theory techniques in economic simulations is examined. A model of the capital investment accelerator is used for illustration. It is shown that behavior approaching optimality can be achieved in a highly nonlinear system with simple heuristics based on linearization and constant state feedback with an appropriate choice of desired closed‐loop poles. Applications to real‐life situations are discussed, and suggestions are made for approaching potential problems using similar control theory techniques.