Dynamic programming is sequential decision making technique. It is a recursive technique we come from final stage to initial stages. A decision taken at one stage influences the decisions in other stages. Dynamic programming technique is useful in a large number of multi period business problems.
Terms in dynamic programming:
- Stage: Period or logical sub problem.
- State variables: Possible initial situations or conditions.
- Decision variables: Alternatives that exist at each stage.
- Decision criteria: Statement concerning objectives of a problem.
- Optimum policy: A set of decision rules developed as a result of decision criterion that gives optimal decision.
Advantages of dynamic programming:
Efficiency: Reduces the time complexity of certain problems from exponential to polynomial.
Structured: Provides a clear structure for solving complex problems.
Dynamic programming is widely used in fields such as operations research, computer science and economics for optimization and decision-making problems.
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