6,783 research outputs found
Shape-constrained Estimation of Value Functions
We present a fully nonparametric method to estimate the value function, via
simulation, in the context of expected infinite-horizon discounted rewards for
Markov chains. Estimating such value functions plays an important role in
approximate dynamic programming and applied probability in general. We
incorporate "soft information" into the estimation algorithm, such as knowledge
of convexity, monotonicity, or Lipchitz constants. In the presence of such
information, a nonparametric estimator for the value function can be computed
that is provably consistent as the simulated time horizon tends to infinity. As
an application, we implement our method on price tolling agreement contracts in
energy markets
- …