The Objectives of this paper are: (1) to introduce the concept of spline functions; and (2) to account for complete and partial non-reversibility with spline functions. This paper illustrates this approach using a supply response example.

Dynamic programming models with continuous state and control variables are solved approximately using numerical methods in most applications. We develop a method for measuring the accuracy of numerical solution of stochastic dynamic programming models. Using this method, we compare the accuracy...

A computationally efficient method is developed in this paper for deriving a sequence of bounds to the global value of an integer fixed charge problem where certain functions are linear only for positive values of the argument and have a jump discontinuity at the origin. While other efficient...

In this paper the ability to sign supply-side option value is studied. The compensating and equivalent option prices are defined, and it is argued that equivalent option price is the preferred welfare measure. In the absence of income risk, if the probability distribution of supply is degenerate...