Numerous control problems in economics can be characterized as optimal switching problems, including optimal stopping and entry/exit problems. With certain notable exceptions, solutions to such problems must be computed numerically. This paper discusses an approach to obtaining a numerical solution in a fairly general setting and describes a user-friendly MATLAB implementation that simplifies that process.
Suggested citation: Fackler, Paul L (2018). Solving Optimal Switching Models. (CEnREP Working Paper No. 18-019). Raleigh, NC: Center for Environmental and Resource Economic Policy.