Models Focused on Dynamic Programming

Abstract

In dynamic econometric models, the characteristic and also essential element is the time factor expressed by a specific form of application in such mathematical models and namely by the “trend” function. This is because the activity of any organisational entity and its evolution are not static. It is constantly adapting to the environment wherein it performs its activity. It is only thus that organisational entities can withstand the environmental changes. Determining factor time to obtain solution considering that it has changed from one period to another. In this sense the solution obtained by a dynamic programming model is actually a sequential solution in that it provides a size for each time period. The final solution is actually a solution technique improved by successive steps starting from the size of the solution obtained at the beginning of the period considered. Iterative calculations obtain the solution related to the size of the end time of the period. Discreet dynamic econometric models and stationary models are used. The interpretation of such dynamic programs is done based on the graph theory, using a graph attached to that dynamic model. A separate issue is the strategic management that uses very often the econometric models to optimise the decisions of the organisational entities based on multiple criteria.