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Understanding the Difference Between Robust Control and Optimal Control in a Linear Discrete-Time System with Time-Varying Parameters

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Abstract

Robust control has been a very popular area of research in the last two decades. The goal of this paper is to investigate the assumptions implicit in the “nonprobabilistic nature” of the a priori information used to derive the linear-quadratic robust control in discrete-time. This is done by comparing robust control with the optimal control for a linear system with time-varying parameters. First the theoretical differences between the two approaches are discussed. Then they are used in two numerical examples: a simple model with one control, one state and a time horizon of two periods, which is suitable for hand calculations, and the permanent income model. The main conclusion is that the decision maker applying robust control is indeed assuming a very restricted class of true, unknown models.

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Authors and Affiliations

  1. Dipt. Economia Politica, Università di Siena, 53100, Siena, Italy

    MARCO P. TUCCI

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  1. MARCO P. TUCCI
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Correspondence to MARCO P. TUCCI.

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JEL classification: C61

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TUCCI, M.P. Understanding the Difference Between Robust Control and Optimal Control in a Linear Discrete-Time System with Time-Varying Parameters. Comput Econ 27, 533–558 (2006). https://doi.org/10.1007/s10614-005-9002-6

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  • DOI: https://doi.org/10.1007/s10614-005-9002-6

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