Genesis of indifference thresholds and infinitely many indifference points in discrete time infinite horizon optimisation problems

This article investigates the discrete time indifference-attractor bifurcation of infinite horizon continous-time optimal control problems with a single state variable. We show that these bifurcations are linked to a heteroclinic bifurcation scenario of the state-costate equations, and we analyse the consequences for the optimal solutions. In particular, we can characterise the bifurcation value at which indifference thresholds appear by a geometric condition, and we find that for certain parameter values, there are countably infinitely many indifference points. We apply our results to a modified version of the shallow lake pollution management problem.

The optimal lockdown intensity for COVID-19

One of the principal ways nations are responding to the COVID-19 pandemic is by lockingdown portions of their economies to reduce infectious spread. This is expensive in terms oflost jobs, lost economic productivity, and lost freedoms. So it is of interest to ask: What isthe optimal intensity with which to lockdown, and how should that intensity vary dynamicallyover the course of an epidemic? This paper explores such questions with an optimal controlmodel that recognizes the particular risks when infection rates surge beyond the healthcaresystem's capacity to deliver appropriate care. The analysis shows that four broad strategies canbe optimal, ranging from brief lockdowns that only \smooth the curve" to sustained lockdownsthat prevent infections from spiking beyond the healthcare system's capacity. Within this model,it can be optimal to have two separate periods of locking down, so returning to a lockdown afterinitial restrictions have been lifted is not necessarily a sign of failure. Relatively small changesin judgments about how to balance health and economic harms can alter dramatically whichstrategy is optimal. Indeed, there are constellations of parameters for which two or even three ofthese distinct strategies can all be optimal for the same set of initial conditions; these correspondto so-called triple Skiba points. The performance of trajectories can be highly nonlinear in thestate variables, such that for various times t, the optimal unemployment rate could be low,medium, or high, but not anywhere in between. These complex dynamics emerge naturally from modeling the COVID-19 epidemic and suggest a degree of humility in policy debates.Even people who share a common understanding of the problem's economics and epidemiologycan prefer dramatically di_erent policies. Conversely, favoring very di_erent policies is notevidence that there are fundamental disagreements