APPLICATIONS OF MATHEMATICAL CONTROL THEORY TO ACCOUNTING AND BUDGETING. I. THE CONTINUOUS WHEAT TRADING MODEL
CARNEGIE-MELLON UNIV PITTSBURGH PA MANAGEMENT SCIENCES RESEARCH GROUP
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A brief introduction to continuous mathematical control theory is presented. A model having two state variable accounts, cash and wheat, is defined by means of differential equations. Adjoint functions, the Hamiltonian function, and the optimum bang-bang policy are derived. Interpretations of the Hamiltonian and switching functions and a numerical example are given. The results are extended to the case where transaction costs and spoilage costs are incurred.
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