The Unaffordable Price of Static Decision-making Models Challenges in Economics and Management Science

At the 15^th Viennese Workshop on Optimal Control and Dynamic Games, held in July 2022, experts in economics and the management sciences identified a concerning trend: static decision-making models, while less effective than dynamic ones, are becoming increasingly prevalent. This book aims to address the economic and social costs associated with reliance on static models and to demonstrate the advantages of applying dynamic approaches.

Static models may be easier to formulate, but they often overlook the long-term consequences of decisions, promoting myopic practices that can lead to poor outcomes. In contrast, dynamic models foster a more comprehensive perspective, enabling foresight in decision-making – which is crucial for issues involving stock variables, such as pollution, reputation, and inventory. The book explores the limitations of static models, including their inability to capture long-term outcomes, history-dependent solutions, and the impact of abrupt contextual changes. It also highlights recent advances in dynamic modeling techniques that can enhance accuracy and help adapt to complex decision-making environments.

By promoting the shift from static to dynamic models, this book aspires to open new research opportunities and provide valuable insights for researchers, students, policymakers, and managers in the fields of economics and the management sciences.

Turning the page.- On the use of dynamic models in economics.-  What to do with uncertainties?.- Optimization in age-structured dynamic economic models.-  A vindication of open-loop equilibria in differential games.- A linear state game of advertising à la Vidale-Wolfe.- The cost of myopia with respect to a switching time in an advertising model.- The limits of static decision-making rules in supply chain management.- On the rebound effect of cleaner technologies and climate change: radical technology innovations needed.- On the effects of an increase in the number of abaters in pollution abatement games.- Agroecology and biodiversity: A benchmark dynamic model.- Open-loop control-based linear-quadratic stochastic game with application to counter terror: Farsighted versus myopic policies.

Fouad El Ouardighi is a professor of operations and supply chain management, optimal control theory, and differential game theory at ESSEC Business School, France. His research focuses on developing interdisciplinary approaches at e.g. the interface of operations and marketing management, in environmental economics and sustainable operations management, R&D competition, and pandemic control, etc., and more generally on promoting the use of dynamic methods in economics and management science. He has been a visiting scholar at various academic institutions, such as the University of Washington in Seattle, HEC-Montreal, McGill University, Bar-Ilan University, HEC-Paris, and the Technical University of Vienna. 

Gustav Feichtinger is an emeritus professor in operations research at the Technical University of Vienna, Austria, where he founded the Institute of Operations Research, since renamed the Research Unit for Operations Research and Control Systems. He is also the founder of the Vienna school of optimal control theory and dynamic games, which has since gained international prominence and paved the way into the academic world for many scholars who now hold senior positions in various universities throughout the world. He organized the highly regarded series of Viennese Workshops on Optimal Control, Dynamic Games, and Nonlinear Dynamic Systems for more than 25 years. He has broad research interests and has made substantial contributions in such diverse ?elds as optimal control theory, operations research, demography, economics, the management sciences, population dynamics, the social sciences, etc. He has been a visiting scholar at many universities in Europe, North America, Australia, Chile, Colombia, Russia, Iran, Vietnam, Japan, and China.