Stochastic optimal control problems with measurable coefficients via L^p-viscosity solutions and applications to optimal advertising models

2025/02/04 by de Feo, Filippo
#49K45 #49L12 #49L20 #49L25 #49N35 #93E20 #FOS: Economics and business #FOS: Mathematics #General Economics (econ.GN) #Optimization and Control (math.OC) #Probability (math.PR)

paper · doi:10.48550/arxiv.2502.02352

Abstract

We consider fully non-linear stochastic optimal control problems in infinite horizon with measurable coefficients and uniformly elliptic diffusion. Using the theory of L^p-viscosity solutions, we show existence of an L^p-viscosity solution v∈ W_{\rm loc}^2,p of the Hamilton-Jacobi-Bellman (HJB) equation, which, in turn, is also a strong solution (i.e. it satisfies the HJB equation pointwise a.e.). We are then led to prove verification theorems, providing necessary and sufficient conditions for optimality. These results allow us to construct optimal feedback controls. We use the theory developed to solve a stochastic optimal control problem arising in economics within the context of optimal advertising.

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