The idea that, in a dynamic economic problem, at any point in time the decision maker can choose an optimal action by comparing the value of stopping versus continuing in an optimal fashion is known as
A) the Principle of Hyperbolic Preferences
B) Bellman's Principle of Optimality
C) Bellman's Exponential Discounting

Question

Quizplus · Accepted Answer

The idea described in the question is Bellman's Principle of Optimality, which states that an optimal policy has the property that whatever the initial state and initial decision are, the remaining decisions must constitute an optimal policy with regard to the state resulting from the first decision. The other options, the Principle of Hyperbolic Preferences and Bellman's Exponential Discounting, are not related to this idea.

The Idea That, in a Dynamic Economic Problem, at Any