Endogenous Grids in Higher Dimensions: Delaunay Interpolation and Hybrid Methods

34 Pages Posted: 21 Oct 2014

See all articles by Alexander Ludwig

Alexander Ludwig

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA); Goethe University Frankfurt

Matthias Schoen

University of Cologne

Multiple version iconThere are 2 versions of this paper

Date Written: June 11, 2014

Abstract

This paper investigates extensions of the method of endogenous gridpoints (ENDGM) introduced by Carroll (2006) to higher dimensions with more than one continuous endogenous state variable. We compare three different categories of algorithms: (i) the conventional method with exogenous grids (EXOGM), (ii) the pure method of endogenous gridpoints (ENDGM) and (iii) a hybrid method (HYBGM). ENDGM comes along with Delaunay interpolation on irregular grids. Comparison of methods is done by evaluating speed and accuracy. We find that HYBGM and ENDGM both dominate EXOGM. In an infinite horizon model, ENDGM also always dominates HYBGM. In a finite horizon model, the choice between HYBGM and ENDGM depends on the number of gridpoints in each dimension. With less than 150 gridpoints in each dimension ENDGM is faster than HYBGM, and vice versa. For a standard choice of 25 to 50 gridpoints in each dimension, ENDGM is 1.4 to 1.7 times faster than HYBGM in the finite horizon version and 2.4 to 2.5 times faster in the infinite horizon version of the model.

Keywords: Dynamic Models, Numerical Solution, Endogenous Gridpoints Method, Delaunay Interpolation

JEL Classification: C63, E21

Suggested Citation

Ludwig, Alexander and Schoen, Matthias, Endogenous Grids in Higher Dimensions: Delaunay Interpolation and Hybrid Methods (June 11, 2014). Max Planck Institute for Social Law and Social Policy Discussion Paper No. 274-13, Available at SSRN: https://ssrn.com/abstract=2512231 or http://dx.doi.org/10.2139/ssrn.2512231

Alexander Ludwig (Contact Author)

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Matthias Schoen

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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