Comments on seminar 3

Someone at the monday seminar asked whether the FOC with respect to 'a_i' shouldn't also be part of the solution in P2 (d). The answer is yes, in principle, it should. Both conditions are necessary for the decision on x_i for the individual firm.

However (as one of you asked about), in P2 (e), we do not use this condition as a constraint to determine the optimal policy, because it is already taken care of when N*c(a,y) is part of the minimization problem.

Sorry about the short and messy section on optimal control theory. We will get some practice on this in seminar 4.

Eivind