The upper right cell now contains a value which is infinity, given that we have attempted a division by zero. Aside: Intuition for VFI I In the iteration period, all future states are the same: we don't care what happens. A consequence of this result is the so-called Bellman’s principle of optimality … changes with time t. C. Bayer Dynamic Macro. However, a better way would be to somehow make use of the \( T \) period solution that we found. At t=0 the agent is given a complete cake with size \bar x. Since we know the analytical solution, this will allow us to assess the accuracy of alternative numerical methods. Suppose we have the problem: $\ max \Sigma\beta^s U(C_t)$ Stack Exchange Network. Cake Eating Problem We start from guess v … Read/Download File Report Abuse. Then, the problem is independent of time in the sense that given in initial condition on the state variable(s), the solution Dynamic Programming The Value Function The cake eating problem is an optimization problem where we maximize utilit.y max c XT t=0 tu(c t) (17.2) subject to XT t=0 c t = W c t 0: One way to solve it is with the aluev function. cake eating problem bellman equationadventure park brooklyn cake eating problem bellman equation Menu how is myrtle contrasted with daisy? Macroeconomics Review Sheet: Laibson - Harvard University Summer Term 2011 Christian Bayer - uni-bonn.de