Advances in Mathematical Economics

Advances in Mathematical Economics 19
Shigeo Kusuoka
Toru Maruyama Editors
Advances in
Mathematical
Economics
Volume 19
Managing Editors
Shigeo Kusuoka Toru Maruyama

The University of Tokyo Keio University
Tokyo, JAPAN Tokyo, JAPAN
Editors
Robert Anderson Jean-Michel Grandmont Kunio Kawamata

University of California, CREST-CNRS Keio University
Berkeley Malakoff, FRANCE Tokyo, JAPAN
Berkeley, U.S.A.
Norimichi Hirano Hiroshi Matano
Charles Castaing The University of Tokyo
Universit Montpellier II Yokohama National
University Tokyo, JAPAN
Montpellier, FRANCE
Yokohama, JAPAN
Francis H. Clarke Kazuo Nishimura
Universit de Lyon I Kyoto University
Villeurbanne, FRANCE Tatsuro Ichiishi Kyoto, JAPAN
The Ohio State University
Egbert Dierker Ohio, U.S.A. Yoichiro Takahashi
University of Vienna The University of Tokyo
Vienna, AUSTRIA Alexander D. Ioffe Tokyo, JAPAN
Darrell Duffie Israel Institute of
Stanford University Technology Akira Yamazaki
Stanford, U.S.A. Haifa, ISRAEL Hitotsubashi University
Tokyo, JAPAN
Lawrence C. Evans
University of California, Seiichi Iwamoto Makoto Yano
Berkeley Kyushu University Kyoto University
Berkeley, U.S.A. Fukuoka, JAPAN Kyoto, JAPAN
Takao Fujimoto Kazuya Kamiya
Fukuoka University The University of Tokyo
Fukuoka, JAPAN Tokyo, JAPAN
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ISSN 1866-2226 ISSN 1866-2234 (electronic)

Advances in Mathematical Economics
ISBN 978-4-431-55488-2 ISBN 978-4-431-55489-9 (eBook)
DOI 10.1007/978-4-431-55489-9
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Contents
On the Integration of Fuzzy Level Sets . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 1

Charles Castaing, Christiane Godet-Thobie, Thi Duyen Hoang,
and P. Raynaud de Fitte
A Theory for Estimating Consumers Preference from Demand . . . . . . . . . . . 33
Yuhki Hosoya
Least Square Regression Methods for Bermudan Derivatives
and Systems of Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 57
Shigeo Kusuoka and Yusuke Morimoto
Discrete Time Optimal Control Problems on Large Intervals . . . . . . . . . . . . . . 91
Alexander J. Zaslavski
Index . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 137
v
Adv. Math. Econ. 19, 132 (2015)
On the Integration of Fuzzy Level Sets
Charles Castaing, Christiane Godet-Thobie, Thi Duyen Hoang,

and P. Raynaud de Fitte
Abstract We study the integration of fuzzy level sets associated with a fuzzy
random variable when the underlying space is a separable Banach space or a
weak star dual of a separable Banach space. In particular, the expectation and the
conditional expectation of fuzzy level sets in this setting are presented. We prove
the SLLN for pairwise independent identically distributed fuzzy convex compact
valued level sets through the SLLN for pairwise independent identically distributed
convex compact valued random set in separable Banach space. Some convergence
results for a class of integrand martingale are also presented.
JEL Classification: C01, C02.

Mathematics Subject Classification (2010): 28B20, 60G42, 46A17, 54A20.
C. Castaing
Dpartement de Mathmatiques, Case courrier 051, Universit Montpellier II, 34095 Montpellier
Cedex 5, France
e-mail: charles.castaing@gmail.com
C. Godet-Thobie
Laboratoire de Mathmatiques de Bretagne Atlantique, Universit de Brest, UMR CNRS 6295, 6,
avenue Victor Le Gorgeu, CS 9387, F-29238 Brest Cedex3, France
e-mail: christiane.godet-thobie@univ-brest.fr
T.D. Hoang
Quang Binh University, Quang Binh, Viet Nam
e-mail: hoangduyen267@gmail.com
P. Raynaud de Fitte ()
Laboratoire Raphal Salem, UFR Sciences, Universit de Rouen, UMR CNRS 6085, Avenue de
lUniversit, BP 12, 76801 Saint Etienne du Rouvray, France
e-mail: prf@univ-rouen.fr
Springer Japan 2015 1

S. Kusuoka, T. Maruyama (eds.), Advances in Mathematical Economics Volume 19,
Advances in Mathematical Economics, DOI 10.1007/978-4-431-55489-9_1
2 C. Castaing et al.
Keywords Conditional expectation Fuzzy convex Fuzzy martingale

Integrand martingale Level set Upper semicontinuous
Article type: Research Article

Received: November 5, 2014
Revised: December 1, 2014
1 Introduction
The study of fuzzy set-valued variables was initiated by Feron [10], Kruse [18],
Kwakernaak [19, 20], Puri and Ralescu [25], Zadeh [30]. In particular, Puri
and Ralescu [25] introduced the notion of fuzzy set valued random variables
whose underlying space is the d -dimensional Euclidean space Rd . Concerning the
convergence theory of fuzzy set-valued random variables and its applications we
refer to [15, 2123, 2527].
In this paper we present a study of a class of random fuzzy variables whose
underlying space is a separable Banach space E or a weak star dual Es of a
separable Banach space.
The paper is organized as follows. In Sect. 2 we summarize and state the needed
measurable results in the weak star dual of a separable Banach space. In particular,
we present the expectation and the conditional expectation of convex weak star
compact valued Gelfand-integrable mappings. In Sect. 3 we present the properties
of random fuzzy convex upper semi continuous integrands (variables) in Es . In
Sect. 4, the fuzzy expectation and the fuzzy conditional expectation for random
fuzzy convex upper semi continuous variables are provided in this setting. Section 5
is devoted to the SLLN for fuzzy convex compact (compact) valued random level
sets through the SLLN for convex compact (compact) valued random sets. The
above results lead to a new class of integrand martingales that we develop in Sect. 6.
Some convergence results for integrand martingales are provided.
Our paper provides several issues in Fuzzy set theory, but captures different tools
from Probability and Set-Valued Analysis and shows the relations among them with
a comprehensive concept.
2 Integration of Convex Weak Star Compact Sets

in a Dual Space
Throughout this paper, .; F ; P / is a complete probability space, E is a Banach

space which we generally assume to be separable, unless otherwise stated, D1 D
.ek /k2N is a dense sequence in the closed unit ball of E, E is the topological
On the Integration of Fuzzy Level Sets 3
dual of E, and B E (resp. B E ) is the closed unit ball of E (resp. E ). We denote

by cc.E/ (resp. cwk.E/) (resp. ck.E/) the set of nonempty closed convex (resp.
weakly compact convex) (resp. compact convex) subsets of E. Given C 2 cc.E/,
the support function associated with C is defined by
.x ; C / D supf< x ; y >; y 2 C g .x 2 E /:
We denote by dH the Hausdorff distance on cwk.E/. A cc.E/-valued mapping

C W ! cc.E/ is F -measurable if its graph belongs to F B.E/, where B.E/
is the Borel tribe of E. For any C 2 cc.E/, we set
jC j D supfkxk W x 2 C g:
We denote by Lcwk.E/
1
.F / the space of all F -measurable cwk.E/-valued
multifunctions X W ! cwk.E/ such that ! ! jX.!/j is integrable. A sequence
.Xn /n2N in Lcwk.E/
1
.F / is bounded if the sequence .jXn j/n2N is bounded in L1R .F /.
A F -measurable closed convex valued multifunction X W ! cc.E/ is integrable
if it admits an integrable selection, equivalently if d.0; X / is integrable.
We denote by Es , (resp. Eb ), (resp. Ec ) the vector space E endowed with
the topology .E ; E/ of pointwise convergence, alias w -topology (resp. the
topology s associated with the dual norm jj:jjEb ), (resp. the topology c of compact
convergence) and by Em the vector space E endowed with the topology m D
.E ; H /, where H is the linear space of E generated by D1 , that is the Hausdorff
locally convex topology defined by the sequence of semi-norms
Pn .x / D maxfjhek ; x ij W k ng; x 2 E ; n 2 N:
Recall that the topology m is metrizable, for instance, by the metric

1
X 1
dE .x ; y / WD .jhek ; x i hek ; y ij ^ 1/; x ; y 2 E :
m 2k
kD1
We assume from now on that dE is held fixed. Further, we have m w

m
c s : On the other hand, the restrictions of m , w , c to any bounded subset
of E coincide and the Borel tribes B.Es /, B.Em / and B.Ec / associated with
Es , Em , Ec , are equal, but the consideration of the Borel tribe B.Eb / associated
with the topology of Eb is irrelevant here. Noting that E is the countable union of
closed balls, we deduce that the space Es is a Lusin space, as well as the metrizable
topological space Em . Let K D cwk.Es / be the set of all nonempty convex
weak compact subsets in E . A K -valued multifunction (alias mapping for
short) X W Es is scalarly F -measurable if, 8x 2 E, the support function
.x; X.:// is F -measurable, hence its graph belongs to F B.Es /. Indeed,
let .fk /k2N be a sequence in E which separates the points of E , then we have
x 2 X.!/ iff hfk ; x i .fk ; X.!// for all k 2 N. Consequently, for any Borel
set G 2 B.Es /, the set
X G D f! 2 W X.!/ \ G ;g
is F -measurable, that is, X G 2 F , this is a consequence of the Projection

Theorem (see e.g. [8, Theorem III.23]) and of the equality
X G D proj fGr.X / \ . G/g:
In particular if u W ! Es is a scalarly F -measurable mapping, that is, if for

every x 2 E, the scalar function ! 7! hx; u.!/i is F -measurable, then the function
f W .!; x / 7! jjx u.!/jjEb is F B.Es /-measurable, and for every fixed
! 2 ; f .!; :/ is lower semicontinuous on Es , i.e. f is a normal integrand. Indeed,
we have
jjx u.!/jjEb D sup jhek ; x u.!/ij:

k2N
As each function .!; x / 7! hek ; x u.!/i is F B.Es /-measurable and

continuous on Es for each ! 2 , it follows that f is a normal integrand.
Consequently, the graph of u belongs to F B.Es /. Let B be a sub--algebra
of F . It is easy and classical to see that a mapping u W ! Es is .B; B.Es //
measurable iff it is scalarly B-measurable. A mapping u W ! Es is said to be
scalarly integrable (alias Gelfand integrable), if, for every x 2 E, the scalar function
! 7! hx; u.!/i is F -measurable and integrable. We denote by GE1 E.F / the
space of all Gelfand integrable mappings and by L1E E.F / the subspace of all
Gelfand integrable mappings u such that the function juj W ! 7! jju.!/jjEb is
integrable. The measurability of juj follows easily from the above considerations.
More generally, by Gcwk.E 1
.; F ; P / (or Gcwk.E / .F / for short) we denote the
1
s / s
space of all scalarly F -measurable and integrable cwk.Es /-valued mappings and
by Lcwk.E
1
.; F ; P / (or Lcwk.E / .F / for short) we denote the subspace of
1
s / s

all cwk.Es /-valued scalarly integrable and integrably bounded mappings X , that
is, such that the function jX j W ! ! jX.!/j is integrable, here jX.!/j WD
supy 2X.!/ jjy jjEb , by the above consideration, it is easy to see that jX j is F -
measurable.
For any X 2 Lcwk.E 1
.F /, we denote by SX .F / the set of all Gelfand-
1
s /
integrable selections of X . The Aumann-Gelfand integral of X over a set A 2 F is
defined by
Z Z
E1A X D X dP WD f f dP W f 2 SX1 .F /g:
A A
Let B be a sub--algebra of F and let X be a K -valued integrably bounded

random set, let us define
SX1 .B/ WD ff 2 L1E E.; B; P / W f .!/ 2 X.!/ a.s.g
and the multivalued Aumann-Gelfand integral (shortly expectation) EX; B of X

Z
EX; B WD f f dP W f 2 SX1 .B/g:
As SX1 .B/ is .L1E E.B/; L1

E .B//-compact [7, Corollary 6.5.10], the expec-
tation EX; B is convex .E ; E/-compact. We summarize some needed results
on measurability for convex weak -compact valued Gelfand-integrable mappings in
the dual space. A K -valued mapping X W E is a K -valued random set if
X.!/ 2 K for all ! 2 and if X is scalarly F -measurable. We will show that
K -valued random sets enjoy good measurability properties.
Proposition 1. Let X W ! cwk.Es / be a convex weak -compact valued
mapping. The following are equivalent:
(a) X V 2 F for all m -open subset V of E .
(b) Graph.X / 2 F B.Es / D F B.Em /.
(c) X admits a countable dense set of .F ; B.Es //-measurable selections.
(d) X is scalarly F -measurable.
Proof. .a/ ) .b/. Recall that any K 2 K is m -compact and m w and
the Borel tribes B.Es / and B.Em / are equal. Recall also that Em is a Lusin
metrizable space. By (a), X is an m -compact valued measurable mapping from
into the Lusin metrizable space Em . Hence Graph.X / 2 F B.Em / because
Graph.X / D f.!; x / 2 Em W dE .x ; X.!// D 0g

m
and the mapping .!; x / 7! dE .x ; X.!// is F B.Em /-measurable.

m
.b/ ) .a/ is obtained by applying the measurable Projection Theorem (see
e.g. [8, Theorem III.23]) and the equality
X V D proj fGraph.X / \ . V /g:
Hence (a) and (b) are equivalent.

.b/ ) .c/. Since Es is a Lusin space, by [8, Theorem III-22], X admits a
countable dense set of .F ; B.Es //-measurable selections .fn /, that is, X.!/ D
w clffn .!/g for all ! 2 .
.c/ ) .d /. Indeed one has .x; X.!// D supn hx; fn .!/i for all x 2 E and for
all ! 2 , thus proving the required implication.
.d / ) .b/. We have already seen that .d / implies that Graph.X / 2 F B.Es /.
As B.Es / D B.Em /, the proof is finished.
Corollary 1. Let X W ! cwk.Es / be a convex weak -compact valued mapping.

The following are equivalent:
(a) X V 2 F for all w -open subset V of E .
(b) Graph.X / 2 F B.Es /.
(c) X admits a countable dense set of .F ; B.Es //-measurable selections.
(d) X is scalarly F -measurable.
Proof. .a/ ) .d / is easy. The implications .d / ) .b/, .b/ ) .c/, .c/ )
.d /, .b/ ) .a/ are already known. For further details on these facts, consult
Proposition 5.2 and Corollary 5.3 in [5].
Let .Xn /n2N be a sequence of w -closed convex sets, the sequential weak upper
limit w -ls Xn of .Xn /n2N is defined by
w -ls Xn D fx 2 E W x D .E ; E/- lim xj I xj 2 Xnj g:

j !1
Similarly the sequential weak lower limit w -li Xn of .Xn /n2N is defined by
w -li Xn D fx 2 E W x D .E ; E/- lim xn I xn 2 Xn g:

n!1
The sequence .Xn /n2N weak star (w K for short) converges to a w -closed convex
set X1 if the following holds
w -ls Xn X1 w -li Xn a.s.
Briefly
w K- lim Xn D X1 a.s.
n!1
We need the following definition.

Definition 1. The Banach space E is weakly compactly generated (WCG) if there
exists a weakly compact subset of E whose linear span is dense in E.
Every separable Banach space is WCG, and every dual of a separable Banach space
(endowed with the dual norm) is WCG.
For the sake of completeness we recall the following [11]
Theorem 1. Suppose E is WCG (not necessarily separable) and let C and Cn .n D
1; 2; : : :/ be weak -closed, bounded, convex non empty sets of E .
Then .:; Cn / ! .:; C / pointwise on E if and only if the sequence .Cn / is
uniformly bounded with w K limit C .
Now we provide some applications.
Theorem 2. Let X; Xn.n 2 N/ be a sequence in Lcwk.E 1

.F / with the following
s /
property: jX j C jXn j g for all n 2 N where g is positive integrable. Then the
following hold:
R R
(a) XdP; Xn dP , .n 2 N/, are convex weak -compact,
(b) If Xn w K converges to X , equivalently, .:; Xn / ! .:; X / pointwise on E,
then
Z Z

w K- lim Xn dP D XdP:
n!1
Proof. (a) As jX j g and jXn j g for all n 2 N, SGe1

.X /.F / and SGe
1
.Xn /.F /
1 1
are convex sequentially .LE ; LE /-compact [7, Corollary 6.5.10], so that
R R s

XdP , Xn dP , .n D 1; 2; : : :/, are convex weak -compact.
(b) Further by the Strassen theorem [8], we have that

Z Z
.x; XdP / D .x; X /dP; 8x 2 E: (1)

Z Z

.x; Xn dP / D .x; Xn /dP; 8x 2 E: (2)

Applying Lebesgues theorem and (1)(2) gives

Z Z
lim .x; Xn dP / D lim .x; Xn /dP
n!1 n!1
Z Z
D .x; X /dP D .x; XdP /:

R R
Invoking Theorem 1, we conclude that Xn dP w K converges to XdP .

The following concerns the continuous dependence of the Aumann-Gelfand
multivalued integral of a cwk.Es /-valued mapping X 2 Lcwk.E
1
.F / depending
s /
on a parameter 20; 1. It has some importance in applications.
Theorem 3. Let X W 0; 1 Es be a convex weakly compact valued mapping
satisfying the properties:
(i) jX.!; /j g.!/; 8!; 2 ; 8 20; 1, where g is a positive integrable
function,
(ii) For every 20; 1, X.:; / 2 Lcwk.E
1
.F /,
s /
(iii) For every ! 2 , 7! X.:; / from 0; 1 into cwk.Es / is scalarly left
continuous. R
Then the mapping 7! X.:; /dP from 0; 1 into cwk.Es / is scalarly
left continuous.
Proof. Follows the lines of the proof of Theorem 2. By (i) jX j g for all 20; 1
with X WD X.:; /. Let n ! . Then X.!; n / scalarly converges to X.!; /,
that is, .x; X.!;
R n // ! .x; X.!; // for every x 2 E and for every ! 2 .
Remember that X dP is convex weakly compact for every 20; 1. Further by
Strassens theorem, we have
Z Z

.x; X dP / D .x; X /dP; 8x 2 E: (3)

Applying Lebesgues theorem and (3) gives

Z Z
lim .x; Xn dP / D lim .x; Xn /dP
n!1 n!1
Z Z

D .x; X /dP D .x; X dP /:

3 Random Fuzzy Convex Upper Semicontinuous Integrands
Thanks to measurable properties developed in Sect. 2 we present now some appli-

cations to a special class of random upper semicontinuous integrands (variables).
We recall some definitions that are borrowed from the study of normal integrands
(alias random lower semi-continuous integrands) on a general locally convex
Suslin space E. A random lower semicontinuous (resp. upper semicontinuous)
integrand is a F B.E/-measurable function X defined on E such that
X.!; :/ is lower semicontinuous (resp. upper semicontinuous). The study of random
lower semicontinuous integrands occurs in some problems in Convex Analysis and
Variational convergence. See e.g. [28] and the references therein. In the following
we will focus on a special class of random upper semicontinuous integrands. Here
the terminologies are borrowed from the theory of fuzzy sets initiated by Zadeh [30]
and random fuzzy sets initiated by Feron [10] and Puri-Ralescu [25]. According to
[30] a fuzzy convex upper semicontinuous variable is a mapping X W E ! 0; 1
such that
(i) X is upper semicontinuous,
(ii) fx 2 E W X.x/ D 1g 6D ;
(iii) X is fuzzy convex, that is, X.x C .1 /y/ min.X.x/; X.y//, for all
2 0; 1 and for all x; y 2 E.
A random fuzzy convex upper semicontinuous variable is an F B.E/-measurable
mapping X W E ! 0; 1 such that each ! 2 , a mapping X! W E ! 0; 1 is
a fuzzy convex upper semicontinuous variable. By upper semicontinuity and fuzzy

convexity, for each ! 2 and for each 20; 1, the level set
X .!/ WD L .X /.!/ WD fx 2 E W X! .x/ g
is closed convex. It is clear that the graph of this multifunction belongs to

F B.E/. In particular, this mapping is F -measurable by the measurable
projection theorem [8, Theorem III. 23]. Further, thanks to [8, Lemma III.39],
for any F B.E/-measurable mapping ' W E ! 0; C1, the function
m.!/ WD supf'.!; x/ W x 2 L .X /.!/g is F -measurable. Similarly the graph of
the multifunction fx 2 E W X.!; x/ > 0g WD X! > 0 belongs to F B.E/.
In particular, this mapping is F -measurable by the measurable projection theorem
[8, Theorem III. 23]. Further, thanks to [8, Lemma III.39], for any F B.E/-
measurable mapping ' W E ! 0; C1, the function ! 7! supf'.!; x/ W
x 2 X! > 0g is F -measurable. In particular, if the underlying space E is a
separable Banach space, then X! > 0 D fx 2 E W X.!; x/ > 0g is F -
measurable and so is the mapping X! > 0 so that the mapping ! 7! supfjjxjj W
x 2 X! > 0g is F -measurable, further assume that X! > 0 is compact and
! 7! g.!/ WD supfjjxjj W x 2 X! > 0g integrable, then L .X / is convex compact
valued and integrably bounded: jL .X /j g for all 20; 1, here measurability
of g is ensured because of the above measurable properties. Similarly, for each
2 0; 1, LC .X /.!/ WD X! > is compact valued and F -measurable. The
above considerations still hold when the underlying space is the weak star dual Es
of a separable Banach space E because Es is a Lusin space, by measurability results
developed in Sect. 2. Now we present some convergence properties of the level sets
associated with a random fuzzy convex upper semicontinuous integrand.
Proposition 2. Let X W E ! 0; 1 random fuzzy convex upper semicontinuous
integrand with the following properties:
(1) fx 2 E W X.!; x/ > 0g is compact, for each ! 2 ,
(2) g WD jL0C .X /j 2 L1 ,
(3) The ck.E/-valued mapping 7! L .X / is scalarly left continuous on 0; 1.
Then the following hold
R R
(a) L .X /dP D f f dP W f 2 SL1 .X / g . 20; 1/ is convex compact.
R
(b) The ck.E/-valued mapping 7! L .X /dP is scalarly left continuous on
0; 1.
Proof. With the properties (1)(2), we see that the level sets L .X / ( 20; 1)
belong to the space Lck.E/ .; F / of all convex compact valued integrably bounded
multifunctions so that the Aumann integral of L .X /
Z Z
L .X /dP D f f dP W f 2 SL1 .X / g

is convex compact,1 where SL1 .X / denotes the set of all integrable selections of the
convex compact valued multifunction L .X /. We only sketch the proof. R See [2, 8]
for details. Indeed, SL1 .X / is convex weakly compact in L1E so that L .X /dP is
convex weakly compact in E. Making use of Strassens formula we have
Z Z
.x ; L .X /dP / D .x ; L .X //dP; 8x 2 E :

Applying Lebesgues dominated convergence theorem shows that

Z

x 7! .x ; L .X /dP /

is continuous on the closed unit ball equipped with the topology of compact
convergence = weak star topology that is compact metrizable with respect to these
topologies. From the Banach-Dieudonn theorem we conclude that this mapping is
continuous on Ec . Thus .a/ is proved. Taking account of (3), .b/ follows easily.
The following is a dual variant of the preceding result.
Proposition 3. Let X W Es ! 0; 1 be a random fuzzy convex upper
semicontinuous variable with the following properties:
(1) fx 2 Es W X.!; x / > 0g is weak -compact, for each ! 2 ,
(2) g WD jLC0 .X /j 2 L ,
1

(3) The cwk.Es /-valued mapping 7! L .X / is scalarly left continuous on 0; 1.
Then the following hold
R R
(a) L .X /dP D f f dP W f 2 SL1 .X / g . 20; 1/ is convex weak -compact.
R
(b) The cwk.Es /-valued mapping 7! L .X /dP is scalarly left continuous
on 0; 1.
Proof. With the properties (1)(3), we see that the level sets L .X / ( 20; 1)
belong to the space Lcwk.E / .F / of all convex weak -compact valued integrably
bounded multifunctions so that the Aumann integral of L .X /
Z Z
L .X /dP D f f dP W f 2 SL1 .X / g

is convex weak -compact because the set SL1 .X / is convex sequentially

.L1E ; L1
E /-compact [7, Corollary 6.5.10]. Thus .a/ is proved, .b/ follows from
s
Theorem 3.
1
R
The compactness of L .X/dP according to Debreu integral is not available here, see also the
remarks of Theorem 8 in Hiai-Umegaki [13].
4 Expectation and Conditional Expectation of Level Sets
Now we proceed to the study of the expectation and conditional expectation of the
level sets associated with random fuzzy convex upper semicontinuous integrands.
The following lemma is crucial for this purpose. Compare with related results by
Puri-Ralescu [25] dealing with fuzzy sets on Rd .
Lemma 1. Let X be a random fuzzy convex upper semicontinuous integrand X W
Es ! 0; 1 with the following properties:
(2) g WD jL0C .X /j 2 L1 ,
(3) Assume that 0 < 1 < 2 < : : : < k ! and that
lim .x; Lk .X /.!// D .x; L .X /.!//

k!1
for all ! 2 and for all x 2 E.

Then we have
\Z Z
Lk .X /dP D L .X /dP:
k1
Proof. Using (3) and applying Strassens theorem [8] and Lebesgues dominated
convergence theorem gives
Z Z
lim .x; Xk .!/dP / D lim .x; Xk .!//dP (4)
k!1 k!1
Z Z

D .x; X .!//dP D .x; X .!/dP /:

Since the w -topology coincides with the metrizable topology m , by Theorem 15

in [5] we have
Z Z \Z

C WD w - ls Xn dP D m -LS Xn dP D Xk dP
k1
R
so that C D w K limk!1 Xk .!/dP . Applying Theorem 1 and (4), we have
Z Z
.x; C / D lim .x; Xk .!/dP / D .x; X .!/dP /
k!1
R
for all x 2 E, so that X dP D C by the separability of E, that is,
\Z Z
Xk dP D X dP:
k1

The following theorem yields a crucial property of the expectation of the level
sets associated with a random fuzzy convex upper semicontinuous integrand.
Theorem 4. Let X be a random fuzzy convex upper semicontinuous integrand X W
Es ! 0; 1 with the following properties:
(2) g WD jL0C .X /j 2 L1 ,
(3) For every fixed ! 2 , the cwk.Es /-valued mapping 7! L .X /.!/ D
X .!/ is scalarly left continuous on 0; 1.
Then
R the following
T hold
R
X dP D k1 Xk dP whenever 0 < 1 < 2 < : : : : < k ! .
Proof. Follows from Lemma 1 using the continuity property of the level sets.
Now we proceed to the conditional expectation of the level sets associated with
a random fuzzy convex upper semicontinuous integrand defined on the dual space
Es . For this purpose we need to recall and summarize the existence and uniqueness
of the conditional expectation in Lcwk.E
1
.F / [4, 13, 29]. In particular, existence
s /
results for conditional expectation in Gelfand integration can be derived from the
multivalued Dunford-Pettis representation theorem, see [4]. A fairly general version
of conditional expectation for closed convex integrable random sets in the dual of
a separable Frchet space is obtained by Valadier [29, Theorem 3]. Here we need
only a special version of this result in the dual space Es .
Theorem 5. Let be a closed convex valued integrable random set in Es . Let B
be a sub--algebra of F . Then there exists a closed convex B-measurable mapping
in Es such that:
(1) is the smallest closed convex B-measurable mapping such that 8u 2 S1 ,
E B u.!/ 2 .!/ a.s.
(2) is the unique closed convex B-measurable mapping such that 8v 2
L1
R .B/,
Z Z

.v; /dP D .v; /dP:

(3) is the unique closed convex B-measurable mapping such that S1 D

cl .E B .S1 // where cl denotes the closure with respect to .L1E .B/; L1
E .B//.
Theorem 5 allows to obtain the weak compactness of the conditional expectation

of convex weakly compact valued integrably bounded mappings in E with strong
separable dual. Indeed if F WD Eb is separable and if is a convex weakly
compact valued measurable mapping in E with .!/ .!/B E where 2 L1R ,
then applying Theorem 4 to F gives .!/ D E B .!/ E with .!/
E B .!/B E where B E is the closed unit ball in E . As S1 is .L1E ; L1
E /-
compact, S1 D E B .S1 / L1E . Whence .!/ E a.s. See [29, Remark 4, page
10] for details.
The following existence theorem of conditional expectation for convex weak -
compact valued Gelfand-integrable mappings follows from a multivalued version
of the Dunford-Pettis theorem in the dual space [4, Theorem 7.3]. In particular, it
provides the weak -compactness of conditional expectation for integrably bounded
weak -compact valued scalarly measurable mappings with some specific properties.
Theorem 6. Given 2 Lcwk.E 1
.F / and a sub--algebra B of F , there
s /
exists a unique (for equality a.s.) mapping WD E B 2 Lcwk.E
1
.B/, that is
s /
the conditional expectation of with respect to B, which enjoys the following
properties:
R R
(a) .v; /dP D .v; /dP for all v 2 L1 E .B/.
(b) E B jjB E a.s.
(c) S1 .B/ is .L1E E.B/; L1 E .B//- compact (here S .B/ denotes the set of
1
1
all LE E.B/ selections of ) and satisfies
.v; E B S1 .F // D .v; S1 .B//
for all v 2 L1
E .B/.
(d) E B is increasing: 1 2 a.s. implies E B 1 E B 2 a.s.
Now we need at first a conditional expectation version for Lemma 1.
Lemma 2. Let B be a sub--algebra of F and let X be a random fuzzy convex
upper semicontinuous integrand X W Es ! 0; 1 with the following
properties:
(2) g WD jL0C .X /j 2 L1 ,
(3) Assume that 0 < 1 < 2 < : : : : < k ! and that
lim .x; Lk .X /.!// D .x; L .X /.!//

k!1
for all ! 2 and for all x 2 E.

Let E B X be the conditional expectation of the level sets L .X / WD X , 20; 1.
Then we have
\
E B Xk D E B X :
k1
Proof. We follow some lines of the proof of Lemma 1. But here we need a careful
look using some convergence results in conditional expectation. By (1)(3) we have
L .X /.!/ WD X .!/ Y .!/ for all 20; 1 and for all ! 2 where Y is a
weak -compact valued integrably bounded multifunction. By Theorem 6 and by our
assumption (1)(3) the conditional expectation E B X is convex weak -compact
valued, B-measurable and integrably bounded with E B X .!/ .E B g/.!/ B E
for all 20; 1 and for all ! 2 . Since the weak -topology coincides with the
metrizable topology m , by Theorem 5.4 in [5] the multifunction
\
V .!/ D w - ls E B Xn .!/ D m -LS E B Xn .!/ D E B Xk .!/
k1
is w -compact and B-measurable so that
V .!/ D w K lim E B Xk .!/:

k!1
By Theorem 1, we have
lim .x; E B Xk .!// D .x; V .!//

k!1
for all ! 2 and for all x 2 E. By the dominated convergence theorem for
conditional expectations, we have
.x; V .!// D lim .x; E B Xk .!// D lim E B .x; Xk .!//

k!1 k!1
D E B .x; X .!// D .x; E B X .!//
so that E B X D V by the separability of E, noting that E B X .!/ is convex

weak -compact, and that
\
E B X .!/ D E B Xk .!/
k1
for all ! 2 .
Now we proceed to the conditional expectation of the level sets associated with
such a random fuzzy convex upper semicontinuous integrand X W Es ! 0; 1.
Theorem 7. Let B be a sub--algebra of F and let X be a random fuzzy
convex upper semicontinuous integrand X W Es ! 0; 1 with the following
properties:
(1) fx 2 Es W X.!; x / > 0g is weak*-compact, for each ! 2 ,
(2) g WD jL0C .X /j 2 L1 ,
(3) For every fixed ! 2 , the cwk.Es /-valued mapping 7! L .X /.!/ D
X .!/ is scalarly left continuous on 0; 1.
Then the followingThold

E B X .!/ D k1 E B Xk .!/ for every ! 2 and every 20; 1, whenever
1 < 2 : : : < k ! .
Proof. Here we will use again the monotonicity of the conditional expectation and
the monotonicity of the level sets, namely for ; X X and E B X
E B X . We have to check that
\
E B X .!/ D E B Xk .!/ ( )
k1
for every ! 2 whenever 0 < 1 < 2 < : : : < k ! . By the continuity

of the level sets (3) and the dominated convergence theorem for the conditional
expectation, we have
lim .x; E B Xk .!// D lim E B .x; Xk .!//

k!1 k!1
D E B .x; X .!// D .x; E B X .!//
for all x 2 E, so that the desired inclusion follows from the arguments developed
in first part of the proof of Lemma 2.
With the above considerations, we produce a general result on the conditional
expectation of a convex weak -compact valued X 2 Lcwk.E
1
.F / depending on
s /
the parameter 20; 1.
Theorem 8. Let B be a sub--algebra of F , and let X W 0; 1 Es be a
convex weak -compact valued mapping with the following properties:
(1) jX.!; /j g 2 L1 for all .!; / 2 0; 1,
(2) For each ! 2 , X.!; :/ is scalarly left continuous on 0; 1,
(3) For every fixed 20; 1, X:.; / is scalarly F -measurable.
Then the convex weak -compact valued conditional expectation E B X of the
mapping X enjoys the properties
(a) For each ! 2 , 7! E B X .!/ is scalarly left continuous on 0; 1,
(b) For each 20; 1, ! 7! E B X .!/ is scalarly B-measurable on ,
(c) Assume further that 7! X.!; / is decreasing, for every fixed !, i.e. < 2
T / X.!; /, then 0 < 1 < 2 < : : : < k ! implies
0; 1 implies X.!;
E B X .!/ D k1 E B Xk .!/:
Similarly we have
Theorem 9. Let X W 0; 1 Es be a convex weak -compact valued mapping
with the following properties:
(1) jX.!; /j g 2 L1 for all .!; / 2 0; 1,
(3) For every fixed 20; 1, X.:; / is scalarly F -measurable on .
R
Then the convex weak -compact valued mapping EX WD X.!; /dP enjoys
the properties
(a) 7! EX is scalarly left continuous on 0; 1,
(b) Assume further that 7! X.!; / is decreasing,
T for every fixed !, then 0 <
1 < 2 < : : : < k ! implies EX D k1 EXk :
Corollary 2. Assume that E D Rd and that .; F ; P / has no atoms. Let X W
0; 1 Rd be a compact valued mapping with the following properties:
(1) jX.!; /j g 2 L1 for all .!; / 2 0; 1,
(3) For every fixed 20; 1, X.:; / is scalarly F -measurable on .
R
Then the convex compact valued mapping EX WD X.!; /dP enjoys the
properties
(a) 7! EX is scalarly left continuous on 0; 1,
(b) Assume further that 7! X.!; / is decreasing,
T for every fixed !, then 0 <
1 < 2 < : : : < k ! implies EX D k1 EXk :
Proof. Since E D Rd and .; F ; P / has no atoms, by [8, Theorem IV-17], EX
is convex compact in Rd .
Using the notations of the preceding results and the Negoita-Ralescu representa-
tion theorem [25, Lemma 1] or Hhle and ostak [14, Lemma 6.5.1], we mention a
useful result.
Lemma 3. Let .C /20;1 be a family of convex weak -compact subsets in E with
the properties:
(1) C0 WD Es ,
(2) C C ; 8 < 2 0; 1,
(3) C rB E for all 20; 1,
(4) 7! .x; C / is left continuous on 0; 1 for all x 2 E.
There is a unique fuzzy convex upper semicontinuous variable ' W Es ! 0; 1 such
that fx 2 Es W '.x / g D C , for every 20; 1, where ' is given by
'.x / D supf 2 0; 1 W x 2 C g:
Proof. Step 1. We use at first some arguments and results developed in Lemma 1.
Let 0 < 1 < 2 ; : : : < k ! . By (4) we have
lim .x; Ck / D .x; C / (5)

k!1
for all x 2 E. Note that by (2) and (3), .Cn / is uniformly bounded and
decreasing. Since the w -topology coincides with the metrizable topology m
on bounded subsets in the weak dual, by Theorem 5.4 in [5]
\
C WD w - ls Cn D m -LS Cn D Ck
k1
so that C D w K limk!1 Ck . Applying Theorem 1, we have
.x; C / D lim .x; Ck / (6)

k!1
for all x 2 E, so that using (5) and (6) we have that
.x; C / D .x; C /
for all x 2 E, whence C D C by the separability of E, that is,

\
Ck D C : (7)
k1
Step 2. fx 2 Es W '.x / g D C , for every 20; 1.

Here we may apply the arguments given in the Negoita-Ralescu representation
theorem and the results in Step 1 to get this equality. Let x 2 C0 . Then
0 2 f 2 0; 1 W x 2 C g
which implies
'.x / D supf 2 0; 1 W x 2 C g 0
thus x 2 ' 0 . To show the converse inclusion, let x 2 ' 0 . Then
'.x / D supf 2 0; 1 W x 2 C g 0 :
If '.x / > 0 , there exists 1 0 with x 2 C1 . But then we have C1 C0

by (2), thus x 2 C0 . Assume that '.x / D 0 . Then there exists .k / such that
x 2 Ck for each k and that k " 0 . But then
1
\
x 2 Ck D C0
nD1
by Step 1.
Applying Theorem 4 and Lemma 3, we get the expectation of random fuzzy

convex integrands.
properties:
(2) g WD jL0C .X /j 2 L1 ,
(3) For every fixed ! 2 , the K -valued mapping 7! L .X /.!/ D X .!/ is
scalarly left continuous on 0; 1.
Q / on Es
Then there exist a unique fuzzy convex upper semicontinuous function E.X
satisfying
Z
Q / D
E.X X dP; 8 20; 1I

Q / is the fuzzy expectation of X .

E.X
R R
Proof. Apply Lemma 3 to the family .C D X dP /20;1 with C0 WD X0 dP
D E by taking account of Proposition 3 and Theorem 4.
Now it is possible to provide the fuzzy conditional expectation of random fuzzy
convex upper semicontinuous integrand.
properties:
(2) g WD jL0C .X /j 2 L1 ,
(3) For every fixed ! 2 , the K -valued mapping 7! L .X /.!/ D X .!/ is
scalarly left continuous on 0; 1.
Let E B X D E.X jB/ be the conditional expectation of X for every 2 0; 1
and let
'! .x / WD supf 2 0; 1 W x 2 E B X .!/g
for every ! 2 and for every 2 0; 1. Then the following hold
fx 2 Es W '! .x / g D E B X .!/
Q jB/ WD ' is the fuzzy conditional

for every ! 2 and for every 20; 1; E.X
expectation of X .
Proof. Step 1. By Theorem 6, recall that E B X 2 Lcwk.E

1
/ .B/ and by virtue of
s
Theorem 7
\
E B X .!/ D E B Xk .!/
k1
for every ! 2 and every 20; 1, whenever 1 < 2 ; : : : < k ! .

Step 2. Let 0 20; 1 and let ! 2 . Let x 2 E B X 0 .!/. Then
0 2 f 2 0; 1 W x 2 E B X .!/g
which implies
'! .x / D supf 2 0; 1 W x 2 E B X .!/g 0
thus x 2 '! 0 . To show the converse inclusion, let x 2 '! 0 . Then
'! .x / D supf 2 0; 1 W x 2 E B X .!/g 0 :
If '! .x / > 0 , there exists 1 0 with x 2 E B X1 .!/. But then we have

E B X1 .!/ E B X 0 .!/ by the monotonicity of the conditional expectation,
thus x 2 E B X0 .!/. Assume that '! .x / D 0 . Then there exists .k / such
that x 2 E B Xk .!/ for each k and that k " 0 . But then
1
\
x 2 E B Xk .!/ D E B X0 .!/
kD1
by using Step 1.
It is worth to state the relationships between the fuzzy expectation and the
conditional expectation of a random upper semicontinuous fuzzy convex integrand
X . When E is a reflexive separable Banach space and X 2 LE1 .; F ; P / and B
is a sub--algebra of F , EX is the expectationRof X and E B XR the conditional
expectation of X , then, for any B 2 B, we have B E B XdP D B XdP , now we
have a similar equality if we deal with a random upper semicontinuous fuzzy convex
integrand X , fuzzy expectation E.XQ / and fuzzy conditional expectation E.X
Q jB/.
Namely the following equality holds
Z Z Z
Q jB/ dP D
E.X B
E X dP D Q
X dP D E.X1 B /
B B B
for every B 2 B and for every 20; 1.

Our results can be applied to the convergence of convex weakly compact valued
level sets of a random upper semicontinuous integrand defined on a separable
reflexive Banach space using the fuzzy expectation and the fuzzy conditional
expectation.
Next we will provide some SLLN results for fuzzy random variables in a
separable Banach space.
5 SLLN for Fuzzy Random Variables in a Separable

Banach Space
Let c.E/ (resp. k.E/) (resp. cwk.E/) (resp. ck.E/) denote the set of all nonempty
closed (resp. compact) (resp. convex weakly compact) (resp. convex compact)
subsets in E. Here we focus on convergence in the Polish space .ck.E/; dH / where
dH is the Hausdorff distance on ck.E/. Let us recall and summarize some needed
results.
Lemma 4. Let .Xn / be a sequence in k.E/. If
1X
n
lim dH . coXi ; X / D 0
n!1 n i D1
for some X 2 ck.E/, then
1X
n
lim dH . Xi ; X / D 0
n!1 n i D1
Proof. See e.g. Arstein-Hansen [1], de Blasi and Tomassini [9], Hiai [12].
The following result is borrowed from Castaing and Raynaud de Fitte [6,
Theorem 4.8].
Theorem 12. Let .Xn / be a pairwise independent identically distributed sequence
of integrably bounded ck.E/-valued such that g WD supn2N jXn j r is integrable,
then
EXn D EX1 2 ck.E/; 8n 2 N
and
1X
n
lim dH . Xi ; EX1 / D 0 a.s.
n!1 n i D1
Remarks. It is important to have the convexity and the norm compactness [2] of
EXn D EX1 because EX1 is the norm compactness limit in our SLLN. It is
also worth to note that if .Xn / is a sequence of convex compact valued integrably
bounded i.i.d. random sets, the random variable g D supn jXn j is necessarily
constant (with finite value). See [6] for details.
Now we provide some applications to the SLLN for pairwise i.i.d. compact
valued integrably bounded random sets.
Theorem 13. Let .Xn / be a pairwise independent identically distributed sequence
of integrably bounded k.E/-valued random sets in E such that g WD supn2N jXn j
is integrable. Then
EcoXn D EcoX1 2 ck.E/; 8n 2 N
and
1X
n
lim dH . Xi ; EcoX1 / D 0 a.s.
n!1 n i D1
Proof. Since .coXn / is pairwise independent identically distributed integrably

bounded ck.E/-valued, Theorem 12 shows that
1X
n
dH . coXi ; EcoX1 / D 0 a.s.
n i D1
Invoking Lemma 4 yields
1X
n
n!1 n i D1

The following is an important consequence.
Theorem 14. Assume E D Rd and .; F ; P / has no atom. Let .Xn / be a pairwise
independent identically distributed sequence of integrably bounded k.E/-valued
random sets in E such that g WD supn2N jXn j is integrable. Then
EXn D EX1 2 ck.Rd /; 8n 2 N
and
1X
n
lim dH . Xi ; EX1 / D 0 a.s.
n!1 n i D1
Proof. Since .coXn / is pairwise independent identically distributed integrably

bounded ck.E/-valued, Theorem 12 shows that
1X
n
dH . coXi ; EcoX1 / D 0 a.s.
n i D1
By invoking Lemma 4 it follows that
1X
n
n!1 n i D1
But E D Rd and .; F ; P / has no atom, thus
EXn D EcoXn D EcoX1 D EX1 2 ck.Rd /; 8n 2 N
using Ljapunovs Theorem [8, Theorem IV.17].

Remark. If E D R , .; F ; P / has no atom and X is compact valued integrably
d
bounded, then EX is compact convex, this result is not valid in a separable Banach
space.
Now is a version of SLLN in the primal space for fuzzy random variables.
Theorem 15. Let .X n /n2N be a sequence of random fuzzy convex upper semicon-
tinuous variable X n W E ! 0; 1 with the following properties:
(1) fx 2 E W X n .!; x/ > 0g is compact, for each n 2 N and for each ! 2 ,
(2) g WD supn jL0C .X n /j is integrable.
Assume that
(3) .Xn D L .X n //n2N is pairwise i.i.d, for each 20; 1,
(4) .XnC D LC .X n //n2N is pairwise i.i.d, for each 2 0; 1.
Then we have, for every 20; 1,
1X i
n
lim dH . X ; EX1 / D 0 a.s.
n!1 n i D1
1X i
n
lim dH . 1
X ; EcoXC / D 0 a.s.
n!1 n i D1 C
Assume further that the following condition is satisfied:

(5) Given " > 0, there exists a partition 0 D 0 < 1 < : : : < m D 1 of 0; 1
such that max1km dH .EcoX 1C ; EX1k / < ".
k1
Then we have
1X i
n
lim sup dH . X ; EX1 / D 0:
n!1 20;1 n i D1
n
Proof. (a) Since .Xn /n2N and .XC /n2N are independent identically distributed
compact valued random variables, we have, for every 20; 1, by Theorem 13,
1X i
n
lim dH . X ; EX1 / D 0 a.s. (8)
n!1 n i D1
1X i
n
lim dH . 1
X ; EcoXC / D 0 a.s. (9)
n!1 n i D1 C
(b) Let " > 0 be given. There exists a partition 0 D 0 < 1 < : : : < m D 1 of
0; 1 such that
max dH .EcoX 1C ; EX1k / < ":

1km k1
Let 20; 1. Then there exist k (depending on ) such that k1 < k .
We will use some elementary facts:
1X i 1X i 1X i
n n n
Xk X X C :
n i D1 n i D1 n i D1 k1
EX1k EX1 EcoX 1C :

k1
Now we have the estimation
1X i 1X i
n n
dH . X ; EX1 / dH . X C ; EX1k /
n i D1 n i D1 k1
1X i 1X i
n n
CdH . Xk ; EcoX 1C / dH . X ; EX1k /
n i D1 k1 n i D1 k
1X i
n
CdH . X C ; EcoX 1C / C 2dH .EcoX 1C ; EX1k /
n i D1 k1 k1 k1
1X i 1X i
n n
max dH . Xk ; EX1k / C max dH . X C ; EcoX 1C /
1km n i D1 1km n i D1 k1 k1
C2 max dH .EcoX 1C ; EX1k / WD I1 C I2 C I3 :

1km k1
From (8) it follows that
1X i
n
lim dH . X ; EX1k / D 0 a.s.
n!1 n i D1 k
and from (9), we have that
1X i
n
lim dH . X C ; EcoX 1C / D 0 a.s.
n!1 n i D1 k1 k1
for every k D 1; : : : ; m. Hence for a.s. ! 2 , we have
1X i
n
max dH . X .!/; EX1k / ! 0; as n ! 1:
1km n i D1 k
that is,
I1 ! 0; n ! 1 (10)
Similarly, for a.s. ! 2 , we have
I2 ! 0; n ! 1: (11)
We have
I3 D 2 max dH .EcoX 1C ; EX1k / 2":

1km k1
Finally we have
1X i
n
dH . X .!/; EX1 / < I1 C I2 C 2" (12)
n i D1
for all 20; 1: Since I1 , I2 and " do not depend on , then from (12), for a.s. ! 2
we get
1X i
n
sup dH . X .!/; EX1 / < I1 C I2 C 2":
20;1 n i D1
Passing to the limit when n goes to 1 in the preceding inequality yields
1X i
n
lim dH . X .!/; EX1 / 2" a.s.
n!1 n i D1
Whence
1X i
n
lim sup dH . X .!/; EX1 / D 0
n!1 20;1 n i D1
since " is arbitrary.

Here is an important variant.
Theorem 16. Assume E D Rd and .; F ; P / has no atom. Let .X n /n2N be a
sequence of random fuzzy convex upper semicontinuous variable X n W E !
0; 1 with the following properties:
(1) fx 2 E W X n .!; x/ > 0g is compact, for each n 2 N and for each ! 2 ,
(2) g WD supn jL0C .X n /j is integrable.
Assume that
(3) .Xn D L .X n //n2N is pairwise i.i.d, for every 20; 1,
(4) .XnC D LC .X n //n2N is pairwise i.i.d, for every 2 0; 1.
Then we have
1X i
n
lim sup dH . X ; EX1 / D 0 a.s.
n!1 20;1 n i D1
Proof. (a) Since .Xn /n2N and .XC

n
/n2N are pairwise independent, identically
distributed compact valued random variables, by Theorem 14, we have
1X i
n
lim dH . X ; EX1 / D 0 a.s. (13)
n!1 n i D1
for every 20; 1
1X i
n
lim dH . 1
X ; EXC / D 0 a.s. (14)
n!1 n i D1 C
for every 2 0; 1.
(b) Let " > 0 be given. Using a technique similar to the one developed in Joo et
al [17, Theorem 3.1], we provide a partition 0 D 0 < 1 < : : : < m D 1 of
0; 1 such that
max dH .EX 1C ; EX1k / < ":

1km k1
Let 20; 1. Then there exist k (depending on ) such that k1 < k . We
will use some elementary facts:
1X i 1X i 1X i
n n n
Xk X X C :
n i D1 n i D1 n i D1 k1
EX1k EX1 EX 1C :
k1
Now we have the estimation
1X i 1X i 1X i
n n n
dH . X ; EX1 / dH . X C ; EX1k /CdH . X ; EX 1C /
n i D1 n i D1 k1 n i D1 k k1
1X i 1X i
n n
dH . Xk ; EX1k /CdH . X C ; EX 1C /C2dH .EX 1C ; EX1k /
n i D1 n i D1 k1 k1 k1
1X i 1X i
n n
max dH . Xk ; EX1k / C max dH . X C ; EX 1C /
1km n i D1 1km n i D1 k1 k1
C2 max dH .EX 1C ; EX1k / WD I1 C I2 C I3 :

1km k1
Now the rest of the proof is identical to the last part of the proof of Theorem 15 by
noting that I3 is 2" and I1 ! 0 and I2 ! 0 when n ! 1.
6 Fuzzy Martingale and Integrand Martingale
We discuss in this section the concept of fuzzy martingale and integrand martingale
and provide some related convergence results. Let .Fn /n2N be an increasing
sequence of sub -algebras of F such that F is the -algebra generated by
[n2N Fn . Taking into account the results and notations developed in Sect. 4, the
expected value (or expectation) of the fuzzy convex upper semicontinuous variable
Q n / such that the level set E.X
X n can be defined as a fuzzy variable E.X Q n / D Xn
for every 20; 1 and also the fuzzy conditional expectation of X nC1
with respect
to Fn can be defined as an Fn B.E/-measurable, upper semicontinuous fuzzy
convex integrand E.X Q nC1 jFn / such that E.X
Q nC1 jFn / D E Fn XnC1 for every
n n Q nC1 jFn / for all n 2 N. Using the
20; 1. .X / is a fuzzy martingale if X D E.X
Fn nC1
level sets, it turns out that X D E X for each 20; 1 so that the adapted
n
sequence .Xn /n2N is a convex weakly compact valued L1 -bounded martingale in

Lcwk.E/
1
depending on the parameter 2 0; 1. It is clear that one may consider
the notion of fuzzy submartingale or fuzzy supermartingale by replacing the above
equality by X n E.XQ nC1 jFn / or X n E.X
Q nC1 jFn /. Puri and Ralescu [26] treat
the convergence of a fuzzy submartingale .X n / by using a different notion of fuzzy
conditional expectation and by assuming that X n takes its values in a subspace of

fuzzy sets u 2 FcL with the property that the function 7! L .u/ is Lipschitz
with respect to the Hausdorff distance dH .L .u/; L .u// C j j, for every
; 20; 1, where C is a positive constant.
The above considerations lead to martingales depending on a parameter and
integrand martingales independently of the structure of fuzzy sets.
Now we provide a result of existence of conditional expectation for normal
integrands on a separable Banach space E. A mapping W E ! R is a
F - normal integrand if it satisfies
is lower semicontinuous on E for all ! 2 ,
(a) .!; :/ N
(b) is F B.E/-measurable.
Let us recall a result of existence of conditional expectation for this class of
normal integrands [3, Theorem 5.2] and [16].
Theorem 17. Let W E ! R be a F -normal integrand satisfying
(i) There exist a 2 L1RC .; F ; P /, b 2 RC and u0 2 L1E .; F ; P / such that
a.!/ bjjx u0 .!/jjE .!; x/ 8.!; x/ 2 E:
(ii) .:; :u.:// is integrable for all u 2 L1E .; F ; P /.

Let G be a sub--algebra of F .Then there exists a G -normal integrand E G W
E ! R such that
Z Z
E G .!; u.!//dP .!/ D .!; u.!//dP .!/
A A
for all u 2 L1E .; G ; P / and for all A 2 G . Further, the integrand E G is unique
modulo the sets of the form N E, where N is a P -negligible set in G . E G is the
conditional expectation of relative to G .
Using the conditional expectation of normal integrands, we may define the notion
of lower semicontinuous integrand martingale as follows.
Definition 2. Let .Fn /n2N be an increasing sequence of sub -algebras of F such
that F is the -algebra generated by [n2N Fn and n W E ! RC .n 2 N/ be a
Fn -normal integrand.
The sequence .n ; Fn /n2N of Fn -normal integrands is a lower semicontinuous
integrand martingale if
Z Z
n .!; u.!//dP D E Fn nC1 .!; u.!//dP
A A
for all A 2 Fn , for all u 2 L1E .; Fn ; P / and for all n 2 N:

Now we provide an epiconvergence result for integrand martingales.
Theorem 18. Let .Fn /n2N be an increasing sequence of sub -algebras of F such
that F is the -algebra generated by [n2N Fn , W E ! RC a F -normal
integrand such that .:; u.:// is integrable for all u 2 L1E .; F ; P /. Let E Fn
.n 2 N/ be the conditional expectation of relative to Fn whose existence is
given by Theorem 17. Then, for each u 2 L1E .; F ; P / the following variational
inequality holds:
sup lim sup inf E Fn .!; y/ C kjju.!/ yjjE .!; u.!// a.s.
k2N n!1 y2E
Proof. For each k 2 N, set
k .!; x/ D inf .!; y/ C kjjx yjjE 8.!; x/ 2 E:

y2E
Then we note that
0 k .!; x/ kC1 .!; x/ .!; x/ 8k 2 N 8.!; x/ 2 E:
sup k .!; x/ D .!; x/ 8.!; x/ 2 E:

k2N
Let u 2 L1E .; F ; P /. Let p 2 N. Since E is separable, applying the measurable

selection theorem [8, Theorem III-22], it is not difficult to provide an F -measurable
mapping vk;p;u W ! E such that
1
0 .!; vk;p;u .!// C kjju.!/ vk;p;u .!/jjE k .!; u.!// C
p
for all ! 2 , so that ! 7! .!; vk;p;u .!// and ! 7! kjju.!/ vk;p;u .!/jjE are
integrable, and so vk;p;u 2 L1E .; F ; P /. By our assumption, ! 7! .!; vk;p;u .!//
is integrable, too. Applying Lvys theorem yields a negligible set Nk;p;u such that,
for all ! Nk;p;u ,
lim E Fn .!; vk;p;u .!// D .!; vk;p;u .!//:

n!1
Then we deduce
lim sup inf E Fn .!; y/ C kjju.!/ yjjE

n!1 y2E
lim supE Fn .!; vk;p;u .!// C kjju.!/ vk;p;u .!/jjE

n!1
D.!; vk;p;u .!// C kjju.!/ vk;p;u .!/jjE

1
k .!; u.!// C 8! Nk;p;u :
p
Set Nu WD [k2N;p2N Nk;p;u . Then Nu is negligible. Taking the supremum on k 2 N

in the extreme terms yields
sup lim sup inf E Fn .!; y/ C kjju.!/ yjjE

k2N n!1 y2E
sup k .!; u.!// D .!; u.!// 8! Nu :

k2N

Theorem 19. Let Xn W 0; 1 ! RC with the properties
(a) Xn .:; / is Fn -measurable for all n 2 N, for all 2 0; 1,
(b) jXn .!; / Xn .!; /j C.!/j j, for all n 2 N, for all ! 2 , for all
; 2 0; 1, where C is a positive integrable function,
(c) 0 Xn .!; / .!/, for all n 2 N, for all ! 2 , where is a positive
integrable function,
(d) For each 2 0; 1, .Xn / D .Xn .:; // is a martingale.
Then there exists an L12C C -bounded RC -valued C -Lipschitz integrand X1 W
0; 1 ! R satisfying
lim sup jXn E Fn X1

jD0 a.s.
n!1 20;1
Proof. Since .Xn / is an L1 -bounded martingale for each 2 0; 1, there exists

Y1 2 L1R .F / such that
lim Xn .!/ D Y1

.!/ a.s.
n!1
Passing to the limit when n goes to 1 in the inequality
jXn .!/ Xn .!/j C.!/j j
we get
jY1

.!/ Y1

.!/j C.!/j j
for a.s. ! 2 and for all ; 2 Q, where Q WD .m /m2N is a dense sequence in

0; 1, so that there is a negligible set N such that
jY1

.!/ Y1

.!/j C.!/j jj 8! 2 n N
for all ; 2 Q. Let us set for all .!; / 2 Q, Z1 .!; / D Y1

.!; / for
! 2 n N and Z1 .!; / D 0 for ! 2 N . Then Z1 .!; / is a C -Lipschitzean
integrand on Q. Let us set
X1 .!; r/ D inf C.!/jr j C Z1 .!; /

2Q
for all .!; r/ 2 0; 1. Then we have
jX1 .!; r/ X1 .!; s/j C.!/jr sj; 8.!; r; s/ 2 0; 1 0; 1
and X1 .:; r/ is measurable for any fixed r 2 0; 1 thanks to the measurable

projection theorem [8, Theorem III. 23]. It is not difficult to check that X1 is an
L12C C -bounded RC -valued C -Lipschitz integrand, because
0 X1 .!; r/ C.!/jr jCZ1 .!; / 2C.!/CZ1 .!; / 2C.!/C.!/
for all !; r 2 0; 1. Now we prove that X1 satisfies the required convergence.
By the above construction and hypothesis the sequence
..jXnm E Fn X1
m
j; Fn /n2N /m2N
is an L1 -bounded submartingale. Applying Lemma V.2.9 in [24] to this sequence

yields
lim sup jXnm E Fn X1

m
j D sup lim jXnm E Fn X1
m
jD0 a.s.
n!1 m2N m2N n!1
Recall that
jXn Xn j C.!/j j
and
jX1

X1

j C.!/j j
for all ; 2 0; 1. By the Lipschitz property of X1 and Jensens inequality, we

have the estimation
jE Fn X1

E Fn X1

j E Fn jX1

X1

j E Fn C j j
for all ; 2 0; 1. Consequently the mapping 7! Xn E Fn X1

is Lipschitz on
0; 1. So we conclude that
sup jXnm E Fn X1
m
j D sup jXn E Fn X1

j
m2N 20;1
Finally we get
lim sup jXn E Fn X1

j D lim sup jXnm E Fn X1
m
j
n!1 20;1 n!1 m2N
D sup lim jXnm E Fn X1

m
j D 0 a.s.
m2N n!1

The above results lead to the study of integrand martingale-submartingale-
pramarts in a more general context.
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Adv. Math. Econ. 19, 3355 (2015)
A Theory for Estimating Consumers Preference

from Demand
Yuhki Hosoya
Abstract This study shows that if the estimate error of a demand function
satisfying the weak axiom of revealed preference is sufficiently small with respect to
local C 1 topology, then the estimate error of the corresponding preference relation
(which is possibly nontransitive, but uniquely determined from demand function,
and transitive under the strong axiom) is also sufficiently small. Furthermore, we
show a similar relation for the estimate error of the inverse demand function with
respect to the local uniform topology. These results hold when the consumption
space is the positive orthant, but are not valid in the nonnegative orthant.
Keywords Demand function Inverse demand function Integrability theory

Closed convergence topology Uniform convergence topology C 1 convergence
topology

Received: January 9, 2014
Revised: November 14, 2014
JEL Classification: D11.

Mathematics Subject Classification (2010): 91B16, 62P20.
Y. Hosoya ()
Department of Economics, Kanto-Gakuin University, Kanazawa-ku, Yokohama-shi,
Kanagawa-ken, Japan
e-mail: hosoya@kanto-gakuin.ac.jp

34 Y. Hosoya
1 Introduction
In economics, estimating a preference relation from observed data is very important

for conducting welfare analysis. Both revealed preference theory and integrability
theory approach this problem, and share the same key idea. Because purchase
behaviors are observed, the demand function is much easier to estimate than the
preference relation. Hence, if there exists a method to calculate the preference
relation from the demand function, then the difficulty of estimating the preference
relation decreases.
In the nineteenth century, Antonelli [2] presented a sufficient condition for the
local existence of a utility function. Pareto [10] also considered this problem,
before Samuelson [14] connected their classical conditions to the symmetry of the
Slutsky matrix of the demand function. The general existence of the corresponding
preference of the demand function obeying the strong axiom of revealed preference
was proved by Richter [13] and Afriat [1]. For computations, Hurwicz and Uzawa
[7] presented a method of constructing a utility function from a demand function.
Kim and Richter [9] and Quah [12] extended the result of Richter [13] for demand
functions obeying the weak axiom of revealed preference.
This study is based on the work of Hosoya [6], who presented a method of
constructing a preference relation for a smooth demand function with the weak
axiom, whose demand function is exactly the same as the original demand function.
This preference relation is complete, but may be nontransitive.1 However, the
transitivity is revived when this demand function obeys the strong axiom. Moreover,
this study shows that such a preference is unique, i.e., there is no other usual
(that is, complete, continuous, and p-transitive, which is defined later) preference
relation corresponding to the same demand function. Let P W f 7!%f denote
this mapping. Thus, if we obtain an estimate f of the demand function, then we
simultaneously obtain an estimate %f D P .f / of the corresponding preference
relation.
However, the actual estimation process is always associated with the estimate
error. If the estimator uses a sophisticated econometric method, then the estimate
error of the demand function may become small. However, it remains unknown
whether the estimate error of the corresponding preference relation is also reduced.
To deal with this problem, we should first clarify the meaning of the term small.
In general, economists use the closed convergence topology for the space of the
preference relations.2 Hence, the sentence the estimate error of the preference
relation is small means that the estimated preference is within a smallneighborhood
1
Therefore, in this paper the notion of a preference relation does not include the transitivity
requirement.
2
This topology was induced by Kannai [8]. For a detailed treatment of this topology, see
Hildenbrand [5].
A Theory for Estimating Consumers Preference from Demand 35
of the true preference with respect to the closed convergence topology. So, what
is the topology induced in the space of the demand functions? If the topology is
inappropriate, then the estimate error of the corresponding preference relation does
not become small. Hence, our problem is the following: what topology on the space
of the demand functions makes the function P continuous?
This study answers the above question. If .fk /k is a sequence of demand
functions that converges to f with respect to the local C 1 topology, then .%fk /k
also converges to %f with respect to the closed convergence topology. In addition,
we achieve the following result: if .gk /k is a sequence of inverse demand functions
that converges to g uniformly on any compact set, then the corresponding
sequence of preference relations converges with respect to the closed convergence
topology. The reason the topology of the demand function must be finer than that
of the inverse demand function is very complicated. We discuss this further in the
remarks on our theorems.
We obtain results for the consumption space RnCC . However, many applied
studies actually assume that the consumption space is RnC . Hence, it is preferable
that our results still hold when the consumption space is RnC , but this is not the
case. In fact, there exists a usual demand function that does not correspond to any
transitive and continuous preference on RnC , though it is smooth and satisfies the
strong axiom. We construct such an example.
In Sect. 2, we explain some basic results that are needed for our arguments.
The first subsection summarizes the results of Hosoya [6]. The second subsection
discusses an interpretation of the topologies used in this study. In the last subsection,
we explain the basic results of the ordinary differential equation and derive an
inequality.
The main results are presented in Sect. 3. We present and interpret two theorems.
The proofs of all results are given in the appendix. In Sect. 4, we present an example
that shows our results cannot be extended to the case where the consumption space
is RnC . Section 5 gives our conclusions.
2 Preliminaries
Unless otherwise stated, we assume that the consumption space is RnCC D fx 2

Rn jx i > 0; i D 1; : : : ; ng, where n 2.3
3
The superscript notation x i means the i -th coordinate of x, and f i means the i -th coordinate of
f.
36 Y. Hosoya
2.1 Basic Result
Let A RnCC RCC . We call a function f W A ! a demand function if it

satisfies homogeneity of degree zero and Walras law.4 Note that we do not assume
that the domain A of f is equal to RnCC RCC , because the consumption space is
open, and thus the budget set is not compact.
If A is open and f is C 1 -class, define the following matrix:
Sf .p; m/ D Dp f .p; m/ C Dm f .p; m/f T .p; m/;
where f T .p; m/ denotes the transpose of f .p; m/. This matrix-valued function is
called the Slutsky matrix of f . Then, f satisfies the rank condition if the rank of
Sf .p; m/ is always n 1. We say f obeys the weak axiom if
q f .p; m/ w; f .p; m/ f .q; w/ ) p f .q; w/ > w:
F denotes the set of all demand functions f that are onto and C 1 -class, and satisfies
both the rank condition and the weak axiom. The following proposition was proved
by Hosoya [6].
Proposition 1. Choose any f 2 F . Then, there uniquely exists a function g W !
RnCC such that g n .x/ 1 and, for all x 2 ,
x D f .g.x/; g.x/ x/:
Moreover, g is C 1 -class.
A function g W ! RnCC is called an inverse demand function of f if x D
f .g.x/; g.x/ x/ for any x 2 . Then, the above proposition states that if f 2 F ,
there uniquely exists an inverse demand function g with gn 1, and g is C 1 -class.
Let P1 denote the mapping f 7! g. Then, for any demand function f 2 F , P1 .f /
is the unique function g W ! RnCC such that g n .x/ 1 and x D f .g.x/; g.x/
x/.
Next, choose any relation % 2 .5 We use the notation x % y to represent
.x; y/ 2%. Likewise, x y denotes .x; y/ 2% and .y; x/ %, and x
y denotes
.x; y/ 2% and .y; x/ 2%. Now, define
4
That is,
f .ap; am/ D f .p; m/; 8a > 0;

p f .p; m/ D m;
for any .p; m/ 2 RnCC RCC .

5
Although we do not restrict this binary relation to any class, any relation appearing later is
complete and p-transitive, which are defined in Proposition 2.
f % .p; m/ D fx 2 jp x m and 8y 2 ; p y m ) x % yg:
The relation f % is called the demand relation of %. If f % is single-valued, then it

is called the demand function of %.6
Now, choose a function g W ! RnCC and consider the following ordinary
differential equation:
yP D .g.y/ x/v .g.y/ v/x;

y.0/ D x:
Let y.tI x; v/ denote the nonextendable solution of the above equation. Let
w.x; v/ D .vx/v.vv/x, and t.x; v/ D minft 0jy.tI x; v/w.x; v/ D 0g. Then,
we can prove that t.x; v/ is well-defined and if x is not proportional to v, it indicates
a unique t such that y.tI x; v/ is proportional to v. Hence, y.t.x; v/I x; v/ D cv
for some constant c > 0. If x is proportional to v, then y.tI x; v/ x, and thus
t.x; v/ D 0 and y.t.x; v/I x; v/ D cv for the constant c D kxkkvk
. Let ug .x; v/ denote
such a constant c. Define the relation %g 2 as
x %g v , ug .x; v/ 1:
The following proposition was proved by Hosoya [6].

Proposition 2. If g W ! RnCC is C 1 -class, then t.x; v/, and thus ug .x; v/; %g ,
is well-defined. Moreover, ug and %g satisfy the following properties:
Completeness. For any .x; v/ 2 2 , x %g v or v %g x.
P-transitivity. For any x; y; z 2 2 with dim.spanfx; y; zg/ 2, x %g y and
y %g z imply x %g z.
Continuity. ug is continuous on 2 and %g is closed in 2 .
Strong monotonicity. x g v if x v and x i v i for any i D 1; : : : ; n.
Representation. For any x; v 2 and y; z 2 spanfx; vg \ ,
y %g z , ug .y; v/ ug .z; v/:
Moreover, if g D P1 .f / for some f 2 F , then7
6
Clearly, f % satisfies the homogeneity of degree zero. In addition, f % satisfies Walras law if %
is locally nonsatiated, i.e., for any x 2 and any neighborhood U of x, there exists y 2 U such
that y x.
This implies x D f % .g.x/; g.x/ x/ for any x 2 . This result can be shown even if g is
7 g
not included in the range of P1 . In fact, x 2 f % .g.x/; g.x/ x/ for any x 2 if and only if
g
w Dg.x/w 0 for any x 2 and w 2 R with g.x/ w D 0. However, if g D P1 .f / for some

T n
f 2 F , this condition holds automatically. See Theorem 1 and Proposition 1 of Hosoya [6] for
more detailed arguments.
38 Y. Hosoya
f % D f;
g
and, for any % 2 with f % D f , if it satisfies completeness, p-transitivity, and

continuity, then %D%g .
Let G denote the set of all C 1 -class function g W ! RnCC and P2 denote the
mapping g 7!%g .
We call %g D P2 .P1 .f // the corresponding preference relation of f . The
reason for this name is as follows.
First, in economics, the preference relation usually means the complete and
transitive binary relation. If % is transitive, then it is clearly p-transitive. Therefore,
if % is complete, transitive, and continuous binary relation and f % D f , then
%D%g by the last result of Proposition 2.
Second, Hosoya [6] showed the following additional result. Suppose that %g D
P2 .P1 .f //. Then, %g is transitive if and only if f satisfies the strong axiom. If
f D f % for some complete and transitive binary relation %, then it satisfies
the strong axiom. This fact show that if f D f % for some complete and
transitive (and not necessarily continuous) binary relation %, then %g is the unique
complete, transitive, and continuous binary relation that satisfies f D f % . In
other words, if %g is nontransitive, then there is no transitive binary relation % that
derives f .
Third, this relation %g must be transitive whenever D R2CC .
Last, this relation %g is easy to interpret. Since g D P1 .f / is an inverse demand
function, g.x/ is a price vector when x is bought. The reader can be easily verified
that yP in the above differential equation is orthogonal to g.y/. Therefore, the curve
y is tangent to the budget line in the plane spanfx; vg at each point, and can thus be
interpreted as the indifference curve passing through x. Then, our definition says
that x is preferred to v if and only if the indifference curve y passes over v. This
interpretation is very natural.
Now, we can prove that ug has the following properties:
ug .x; v/ > 1 , ug .v; x/ < 1;

1 g
ug .x; av/ D u .x; v/;
a
ug .x; v/ 1 if x v:
The first property comes from the representation property of ug . In fact, because
x; v 2 spanfx; vg and ug .v; v/ D 1,
ug .x; v/ > 1 , ug .x; v/ > ug .v; v/ , v 6%g x , ug .v; x/ < 1:
The second property is a direct consequence of the definition of ug . The final

property arises from strong monotonicity.
2.2 Some Properties of Topologies
Let P denote the set of all relations % 2 that are continuous, i.e., closed in 2 .
On P, we introduce a topology, known as the closed convergence topology. For any
sequence .%k /k of P, define the following two sets Limsupk %k and Liminfk %k .
.x; v/ 2 Limsupk %k if and only if for any neighborhood U of .x; v/ and any
k0 2 N, there exists k k0 such that %k \U ;. .x; v/ 2 Liminfk %k if and only
if for any neighborhood U of .x; v/, there exists k0 2 N such that %k \U ; for
any k k0 .
By construction, we have Liminfk %k Limsupk %k . If Liminfk %k D
Limsupk %k D% for some %2 P, then we write Limk %k D%, and the topology
induced by this definition of the limit is called the closed convergence topology.
Note that because Liminfk %k Limsupk %k , we can prove Limk %k D% by
showing that Limsupk %k % Liminfk %k .
Next, consider the space C.X / of all continuous functions on the locally compact
Hausdorff topological space X into Rm . We say the sequence .fk /k of C.X /
converges to f uniformly on any compact set if for any compact set K X ,
lim sup kfk .x/ f .x/k ! 0:

k!1 x2K
Then, we can show the following fact. .fk /k converges to f uniformly on any
compact set if and only if .fk /k converges to f locally uniformly, that is, for
any x 2 X , there exists a neighborhood U of x such that
lim sup kfk .x/ f .x/k ! 0:

k!1 x2U
As X is locally compact, if .fk /k converges to f uniformly on any compact

set, then it converges locally uniformly. Conversely, suppose .fk /k converges to f
locally uniformly. Choose any compact set K and any x 2 K, and let Ux denote the
neighborhood of x that appears in the definition of local uniform convergence. Then,
.Ux /x2K covers K, and thus there exists x1 ; : : : ; xM 2 K such that K [M
i D1 Uxi .
Then,
sup kfk .x/ f .x/k max sup kfk .x/ f .x/k ! 0

x2K i x2Uxi
as k ! 1.
2.3 On Differential Equations
In this subsection, we note several properties of the solution of ordinary differential

equations.
40 Y. Hosoya
First, consider the following ordinary differential equation:
xP D f .t; x; y; z/;
x.t0 / D y;
where f is defined on some open set A RRm Rm Rk that includes .t0 ; y; y; z/,
and is C 1 -class. Then, there uniquely exists a function x.t/ that is defined on an
open interval a; b with a < t0 < b, x.t0 / D y, dx dt
.t/ D f .t; x.t/; y; z/, and
is nonextendable: that is, there is no other function y.t/ that is defined on c; d
with a; bc; d , y.t/ D x.t/ if t 2a; b, and dy
dt
.t/ D f .t; y.t/; y; z/.8 We call
this function x the nonextendable solution under .t0 ; y; z/. The following result is
well-known: suppose ft0 g C f.y; z/g A and C is compact. Let the domain of
the nonextendable solution x under .t0 ; y; z/ be a; b. If b < C1, then there exists
t < b such that if t t < b, then x.t/ C .9
Now, let x.tI y; z/ have the following property: for any .y; z/ with .t0 ; y; y; z/ 2
A, x.y;z/ W t 7! x.tI y; z/ is the nonextendable solution of the above differential
equation under .t0 ; y; z/. We also call the function x itself the nonextendable
solution. It is well-known that the domain of x is an open set in R Rm Rk
and that x is continuous in .t; y; z/.10
R t The following result was given in the 2nd editionb ofatPontryagin [11]: if u.t/
0 .au.s/ C b/ds for any t 2 0; c, then u.t/ a .e 1/ for any t 2 0; c.
However, the 2nd edition of this book has not been translated to English. Therefore,
we introduce a short sketch of the proof of this inequality. Let u0 .t/ D u.t/ and
Z t
ui .t/ D .aui 1 .s/ C b/ds:
0
That is, ui is the Picards iteration of the following integral equation:

Z t
v.t/ D .av.s/ C b/ds:
0
Note that the solution of this equation is v.t/ D ba .e at 1/. By mathematical

induction, we can show that ui .t/ ui 1 .t/ for any i , and ui ! v uniformly.
Hence, we have ui .t/ v.t/ for any i , and especially, u.t/ v.t/.
8
Note that a might be 1 and b might be C1.
9
See Ch.8 of Smale and Hirsch [15] for detailed arguments.
10
See Ch.5 of Hartman [4] for detailed arguments.
3 Main Results
We claim the following result.

Theorem 1. If .gk /k converges to g uniformly on any compact set, and all gk and
g are C 1 -class, then %gk converges to %g with respect to the closed convergence
topology.
Theorem 2. Suppose that .fk /k is a sequence of F and converges to f 2 F in the
sense of local C 1 : that is, for any .p; m/ 2 dom.f /, there exists a neighborhood U
of .p; m/ such that U dom.fk / for any sufficiently large k, and
lim sup kfk .q; w/ f .q; w/k D 0;

k!1 .q;w/2U
and
lim sup kDfk .q; w/ Df .q; w/k D 0:

k!1 .q;w/2U
Then, .gk /k D .P1 .fk //k converges to g D P1 .f / uniformly on any compact set.
Combining these theorems, we obtain the following result.
Theorem 3. Suppose .fk /k and f satisfy the same property as in Theorem 2.
Then the relation .P2 .P1 .fk ///k converges to P2 .P1 .f // with respect to the closed
convergence topology.
Remarks. Theorem 1 asserts that if the estimate error on the inverse demand
function is small with respect to the local uniform topology, then the estimate error
of the preference is also small. It is known that local uniform topology is metrizable
by the following metric:
X1
1
.g1 ; g2 / D m
arctan. sup kg1 .y/ g2 .y/k/:
mD1
2 y2 1 ;mn
m
Similarly, Theorem 3 asserts that if the estimate error on the demand function is
small with respect to local C 1 topology, then the estimate error of the preference is
also small.
Why does Theorem 2 require C 1 convergence? Answering this question is rather
difficult, but we attempt to interpret this requirement. Suppose .hk /k is a sequence
of continuous functions that converges uniformly to h. Moreover, suppose all h; hk
are bijective. Our question is the following: is .h1
k /k equicontinuous?
If it is equicontinuous, then by using Ascoli-Arzela theorem, we can show that
.h1
k /k converges to h
1
uniformly. However, we could not ensure that .h1 k /k is
equicontinuous unless .hk /k converges to h with respect to C 1 . Readers will see
42 Y. Hosoya
that, in the proof of Theorem 2, Lemma 4 ensures this equicontinuity, though its
proof is rather complicated. The proof of this fact is closely related to the proof of
the inverse function theorem. In fact, Lemma 4 can be seen as an extension of
inverse function theorem.
To prove Theorem 1, we separate the proof into two parts. In the first, we prove
that Limk %gk D%g if .ugk /k converges to ug uniformly on any compact set. This
result can be verified easily. We should mention the following fact: if g satisfies
the integrability condition (or equivalently, if the Slutsky matrix Sf .p; m/ is always
g g
symmetric), then ug .x; z/ D uug.x;v/ .z;v/
for any x; z; v 2 and uv W x 7! ug .x; v/
is a C 1 -class utility function representing %g .11 Therefore, this result implies that
g g
Limk %gk D%g if the sequence of utility functions .uv k /k converges to uv uniformly
on any compact set.
In the second part, we prove that if .gk /k converges to g uniformly on any
compact set, then .ugk /k converges to ug uniformly on any compact set. To prove
this result, we will use several deep results for ordinary differential equations. The
main problem to be treated is the following: let V 2 be compact, and define
y.tI x; v/; yk .tI x; v/; t.x; v/ and tk .x; v/ as in Sect. 2.1. Then, is t.x; v/ included in
the domain of yk .I x; v/ for any .x; v/ 2 V and sufficiently large k? Or, is tk .x; v/
included in the domain of y.I x; v/? Note that t is not necessarily continuous at
.x; v/ when x is proportional to v. To answer this problem, we should use the
inequality proved in Sect. 2.3.
4 The Case of Corner Solutions
We have assumed that the consumption space is RnCC . If is RnC , can our results
in both Hosoya [6] and this paper be extended to this case?
Let F be the all function f W RnCC RCC ! RnC such that it satisfies
continuity, homogeneity of degree zero, Walras law, and the weak axiom, RnCC
f .RnCC RCC /, and if f .p; m/ 2 RnCC , then f is C 1 -class around .p; m/ and
Sf .p; m/ has rank n 1. Let R.f / be the restriction of f into f 1 .RnCC /. Then,
R.f / 2 F , and thus there uniquely exist a complete, p-transitive, and continuous
preference relation %g D P2 .P1 .R.f /// such that f % D R.f /. Clearly, if .fk /k
g
is a sequence in F that converges to f 2 F with respect to the local C 1

topology,12 then we can easily show that .R.fk //k also converges to R.f / with
respect to the local C 1 topology. Thus, we have .P2 .P1 .R.fk ////k converges to
P2 .P1 .R.f ///. Then, the next question naturally arises: does there uniquely exist a
11
See Theorem 1 of Hosoya [6].
12
That is, .fk /k converges to f uniformly on any compact set, and for any .p; m/ with f .p; m/ 2
RnCC , there exists a neighborhood U of .p; m/ such that .Dfk /k converges to Df uniformly on
U.
complete, p-transitive, and continuous preference %f .RnC /2 such that f % D f ?

f
Moreover, is the operator f 7!%f continuous with respect to the local C 1 topology?
However, the answer to this question is negative. In fact, we can construct a
preference relation % .R2CC /2 that is represented by a C 1 -class utility function,
and two different indifference curves of % have the same limit point. In this case,
any extension of % into the complete binary relation of R2C is either not continuous
or not transitive. Note that this preference has the C 1 -class demand function f % 2
F \ F.
Example 1. At first, we consider the following function:
( 1
e c2 (if c > 0,)
h1 .c/ D
0 (otherwise.)
It is well-known that this function is C 1 -class, increasing on 0; C1, and h1 .c/ !

1 if c ! 1. Next, let
h1 .1 c/
h2 .c/ D 1 ;
h1 .1/

h3 .c/ D tan. h1 .c 2//;
2
h.c/ D h2 .c/ C h3 .c/:
Then, h is a C 1 -class nondecreasing function, h.c/ D 1 if c 2 1; 2, increasing on

0; C1n1; 2, h.c/ # 0 if c # 0, and h.c/ " 1 if c " 1.
Next, let x; y > 0 and consider the following equation:
1 1
1
.x 1C c C y 1C c /1C c D h.c/:
1 1
Because the derivative of the left-hand side of this equation with respect to c is
negative, we have the solution c.x; y/ of this equation is unique. By the implicit
function theorem, we have c.x; y/ is C 1 -class. As the left-hand side is increasing
in both x and y, we have c.x; y/ is increasing in both x and y. Let
.x; y/ % .z; w/ , c.x; y/ c.z; w/:
Then, the indifference curve of % is

1 1 1
L.c/ D f.x; y/ 2 R2CC jx 1C c C y 1C c D h.c/ 1C c g;
1 1 1
44 Y. Hosoya
and thus we can verify that it is strictly convex toward the origin and has non-zero
Gaussian curvature.13 For any p; q; m > 0, define .x.t/; y.t// D .t; mpt q /. Then
d d
dt
c.x.t/; y.t// is positive if t is sufficiently small and dt c.x.t/; y.t// is negative if
m=p t is sufficiently small. Therefore, we have f is a single-valued C 1 -class
%
mapping from R2CC RCC onto R2CC , that is, f % 2 F \ F .

However, for any c 2 1; 2, .0; 1/ and .1; 0/ are the limit points of L.c/. This
indicates that there is no continuous and transitive extension of % on R2C . In fact, if
% is such an extension, we have
1 1 1 1
. ; /
.0; 1/
. 3=2 ; 3=2 /;
4 4 2 2
but c. 14 ; 14 / < c. 23=2

1 1
; 23=2 /, a contradiction.14
Figure 1 illustrates the above example. Note that, by Proposition 1, if some tran-
sitive and continuous preference %0 has the same demand function f % , then %0 D%.
This example indicates a possible unconformity between usual demand functions
and the transitivity assumption of continuous preferences on RnC . Although the
demand function is C 1 -class and satisfies the strong axiom, there may be no
complete, transitive, and continuous binary relation that derives this demand
function.
Fig. 1 Illustration of y
example
L(2)
L(1)
13
This condition assures the differentiability of the demand function. See Debreu [3].
This % has a unique upper semi-continuous and transitive extension. However, we cannot state
14
whether this property is general or not.

5 Conclusion
We have shown that if the estimate error of a demand function is sufficiently small
with respect to the local C 1 topology, then the estimate error of the corresponding
preference relation is also small with respect to the closed convergence topology.
Moreover, we showed that if the estimate error of an inverse demand function
is sufficiently small with respect to the local uniform topology, then the estimate
error of the corresponding preference relation is also small. Furthermore, we gave
an example that indicates our results cannot be extended in the case of a closed
consumption space.
Three future tasks remain. At first, we defined %g from an ordinary differential
equation. But if f violates the rank condition, then g cannot become a continuous
single-valued function.15 However, we might be able to define %g by considering
differential inclusion. Secondly, we did not treat the case in which f is a multi-
valued function. In some cases, f % might be multi-valued, and thus this should be
g
considered. Thirdly, even when the consumption space is the nonnegative orthant,
there might be an appropriate class of preferences such that f 7!%f is a one-to-one
mapping for any F .
Appendix 1: Proof of Theorem 1
We at first introduce a lemma.

Lemma 1. Let .%k /k be a sequence on P and %2 P. Suppose
x %k v , uk .x; v/ 1
x % v , u.x; v/ 1
for some real-valued function uk ; u on 2 . Assume u; uk are continuous and16
uk .x; v/ > 1 , uk .v; x/ < 1; u.x; v/ > 1 , u.v; x/ < 1;

1 1
uk .x; av/ D uk .x; v/; u.x; av/ D u.x; v/;
a a
uk .x; v/ 1 and u.x; v/ 1 if x v:
Then, Limk %k D% with respect to the closed convergence topology if .uk /k

converges to u uniformly on any compact set.
15
See Samuelson [14] or Hurwicz and Uzawa [7].
16
Note that under these conditions, %; %k must satisfy completeness and continuity.
46 Y. Hosoya
Proof. Suppose .uk /k converges to u uniformly on any compact set, and choose any
.x; v/ 2 Limsupk %k . Then, for any neighborhood U of .x; v/ and any k0 2 N,
there exists k k0 such that %k \U ;. Therefore, there exists an increasing
sequence .k.m// such that uk.m/.xm ; vm / 1 and k.xm ; vm / .x; v/k m1 . By
the assumption of uniform convergence, we have juk.m/.xm ; vm / u.xm ; vm /j ! 0.
Because u is continuous, u.xm ; vm / ! u.x; v/, and thus uk.m/.xm ; vm / ! u.x; v/.
As uk.m/.xm ; vm / 1, we have u.x; v/ 1, and thus Limsupk %k %.
Next, under the same assumption, choose any .x; v/ 2%. Then, we have
u.x; v/ 1. This implies u.x; .1 m1 /v/ > 1 for any m. Now, take any
neighborhood U of .x; v/. Then, there exists m > 0 such that .x; .1 m1 /v/ 2 U .
Because uk .x; .1 m1 /v/ ! u.x; .1 m1 /v/ > 1, there exists k0 2 N such that
.x; .1 m1 /v/ 2%k for any k k0 . Hence, we have % Liminfk %k . Therefore, we
have Limk %k D%.
Hence, it suffices to show that .ugk /k converges to ug uniformly on any compact
set.
The next lemma was proved in Hosoya [6]. Thus, we omit the proof of this result.
Lemma 2. Let g W ! RnCC be C 1 -class, and y.tI x; v/ be the nonextendable
solution of the following problem:

y.0/ D x;
where x; v 2 . Define w.x; v/ D .v x/v .v v/x. Then, for any z 2 spanfx; vg,
z w.x; v/ D 0 if and only if z is proportional to v. Let a; b be the domain of
y.I x; v/. Then, t.x; v/ D minft 0jy.tI x; v/ w.x; v/ 0g is well-defined.
Moreover, there exists a continuous function y1 .x; v/; y2 .x; v/ such that y1 .x; v/ D
y2 .x; v/ D x if x is proportional to v, and y.t.x; v/I x; v/ 2 y1 .x; v/; y2 .x; v/
for any .x; v/ 2 2 . Let
vx
A.x; v/ D kxkkv xk:
kxk2
Then, w.x; v/ is orthogonal to v, w.x; v/ 0 if and only if x is not proportional to

v, and if w.x; v/ 0,
yP w.x; v/ D A.x; v/2 .g.y/ v/ > 0:
Hence, y.tI x; v/ w.x; v/ is increasing in t, and thus t.x; v/ is a unique t such that
y.tI x; v/ w.x; v/ D 0.
Lemma 3. Suppose .gk /k converges to g uniformly on any compact set. Then,
.ugk /k converges to ug uniformly on any compact set.
Proof. Let y.tI x; v/ be the nonextendable solution of the following equation:

y.0/ D x;
and yk .tI x; v/ be the nonextendable solution of the following equation:
yP D .gk .y/ x/v .gk .y/ v/x;

y.0/ D x:
Let y.I x; v/ be defined on a.x; v/; b.x; v/. We separate this proof into four steps.
Step 1: fix any .x; v/ 2 2 and c 20; b.x; v/. Then, there exists a compact
neighborhood V of .x; v/ such that y.I y; z/ is defined on 0; c for any .y; z/ 2
V . The set fy.tI y; z/jt 2 0; c; .y; z/ 2 V g is a compact set of , and thus there
exists a compact set C such that the above set is included in the interior
of C . We shall prove that, for sufficiently large k, yk .tI y; z/ is defined for any
.t; y; z/ 2 0; c V , yk .tI y; z/ 2 C , and
kgk gk 2M kykkzkt
kyk .tI y; z/ y.tI y; z/k .e 1/; (1)
M
where M > 0 is a Lipschitz constant of g on C and kgk gk D supw2C kgk .w/
g.w/k.
First,
yk .tI y; z/ y.tI y; z/ D .yk .tI y; z/ y/ .y.tI y; z/ y/

Z t
D yPk .sI y; z/ y.sI
P y; z/ds:
0
Hence, if t 2 0; c is in the domain of yk .I y; z/ and yk .sI y; z/ 2 C for any

s 2 0; t, then we have
kyk .tI y; z/ y.tI y; z/k

Z t
kgk .yk .sI y; z// g.y.sI y; z//k 2kykkzkds
0
Z t
kg.yk .sI y; z// g.y.sI y; z//k 2kykkzkds
0
Z t
C kgk .yk .sI y; z// g.yk .sI y; z//k 2kykkzkds (2)
0
Z t
2kykkzk kg.yk .sI y; z// g.y.sI y; z//k C kgk gkds
0
Z t
2kykkzk .M kyk .sI y; z/ y.sI y; z/k C kgk gk/ds;
0
48 Y. Hosoya
which implies equation (1).17 Hence, if k is sufficiently large (and thus, kgk
gk is sufficiently small), then kyk .tI y; z/ y.tI y; z/k , where > 0 is
sufficiently small so that the following inequality holds:
inf kw y.tI y; z/k 2:

wC;t 20;c;.y;z/2V
Now, define t D supfs 2 0; cj8 2 0; s; yk .I y; z/ 2 C g. Then yk .tI y; z/ 2

C for any t 2 0; t . If t is not included in the domain of yk .I y; z/, then there
exists tO < t such that yk .tI y; z/ C for any t 2 tO; t , a contradiction. Hence,
t is in the domain of yk .I y; z/ and yk .t I y; z/ 2 C .
It suffices to show that t D c. Suppose t < c. Then, the above arguments
implies kyk .t I y; z/ y.t I y; z/k , and thus yk .t I y; z/ is included in the
interior of C . Hence, yk .I y; z/ is defined on t ; t C" and yk .0; t C"I y; z/
C for sufficiently small " > 0, a contradiction. This completes the proof of our
claim.
Step 2: define w.x; v/ as in Lemma 2, and t.x; v/ (resp. tk .x; v/) as the minimum
constant t 0 such that y.tI x; v/ (resp. yk .tI x; v/) is proportional to v. By
Lemma 2, if x is not proportional to v, then t D t.x; v/ if and only if y.tI x; v/
w.x; v/ D 0 and t D tk .x; v/ if and only if yk .tI x; v/ w.x; v/ D 0. Also, again
by Lemma 2, t > t.x; v/ if and only if y.tI x; v/ w.x; v/ > 0 and t > tk .x; v/
if and only if yk .tI x; v/ w.x; v/ > 0. Note that w.x; v/ D 0 and t.x; v/ D
tk .x; v/ D 0 if and only if x is proportional to v.
Step 3: choose any compact subset V of 2 . Fix any " > 0. Let W D f.x; v/ 2
V jky1 .x; v/ y2 .x; v/k < kvk"g, where y1 ; y2 are as in Lemma 2. Because
y1 ; y2 is continuous, W is open in V , and thus V 0 D V n W is compact. By
Lemma 2, if .x; v/ 2 W , then both yk .tk .x; v/I x; v/ and y.t.x; v/I x; v/ are
included in y1 .x; v/; y2 .x; v/, and thus,
kyk .tk .x; v/I x; v/ y.t.x; v/I x; v/k kvk":
Note that
1 1
ug .x; v/ D y.t.x; v/I x; v/ v; ugk .x; v/ D yk .tk .x; v/I x; v/ v:
kvk2 kvk2
(3)
Hence, if .x; v/ 2 W ,
1
jug .x; v/ ugk .x; v/j D j.yk .tk .x; v/I x; v/ y.t.x; v/I x; v// vj
kvk2
kyk .tk .x; v/I x; v/ y.t.x; v/I x; v/k

kvk
":
17
See Sect. 2.3.
Meanwhile, suppose .x; v/ 2 V 0 . If x is proportional to v, then y1 .x; v/ D

y2 .x; v/ D x, and thus .x; v/ 2 W , a contradiction. Hence, x is not proportional
to v. Because t.x; v/ is the unique solution of the equation y.tI x; v/ w.x; v/ D
0, by the implicit function theorem, the function t.x; v/ is continuous on V 0 .
Choose any .x; v/ 2 V 0 and any c.x; v/ 2t.x; v/; b.x; v/, and let V.x;v/ be a
compact neighborhood of .x; v/ in V 0 such that y.I y; z/ is defined on 0; c.x; v/
and t.y; z/ < c.x; v/ for any .y; z/ 2 V.x;v/ . By step 1, we can take a compact
set C.x;v/ RnCC such that
(i) y.tI y; z/ 2 C.x;v/ for any .t; y; z/ 2 0; c.x; v/ V.x;v/ ,
(ii) There exists k0 such that for any k k0 and .y; z/ 2 V.x;v/ , yk .I y; z/ is also
defined on 0; c.x; v/ and yk .tI y; z/ 2 C.x;v/ for any t 2 0; c.x; v/, and
(iii) For any k k0 , Eq. (1) holds for any t 2 0; c.x; v/.
Because V 0 is compact, there is a finite collection f.x1 ; v1 /; : : : ; .xm ; vm /g of V 0
such that [i V.xi ;vi / D V 0 . Hence, it suffices to show that for any i 2 f1; : : : ; mg,
there exists ki such that for any k ki , sup.x;v/2V.x ;v / jugk .x; v/ ug .x; v/j ".
i i
For notational convention, we abbreviate V.xi ;vi / as Vi , C.xi ;vi / as Ci , and c.xi ; vi /
as ci .
Step 4: by definition of Vi , we have t.x; v/ is in the domain of yk if k is
sufficiently large. Hence,
1
jugk .x; v/ ug .x; v/j D j.yk .tk .x; v/I x; v/ y.t.x; v/I x; v// vj
kvk2
1
j.yk .tk .x; v/I x; v/ yk .t.x; v/I x; v// vj
kvk2
1
C j.yk .t.x; v/I x; v/ y.t.x; v/I x; v// vj:
kvk2
By Eq. (1),
1
jyk .t.x; v/I x; v/ y.t.x; v/I x; v/ vj
kvk2
1
kyk .t.x; v/I x; v/ y.t.x; v/I x; v/k
kvk
kgk gk 2M kxkkvkci
.e 1/;
M kvk
50 Y. Hosoya
where the right-hand side is less than 2" uniformly on Vi if k is sufficiently large.
Hence, it suffices to show that, for any sufficiently large k,
1 "
max j.yk .tk .x; v/I x; v/ yk .t.x; v/I x; v// vj :
.x;v/2Vi kvk2 2
By the Cauchy-Schwarz inequality, it suffices to show that, for any sufficiently

large k,
kvk"
max kyk .tk .x; v/I x; v/ yk .t.x; v/I x; v/k :
.x;v/2Vi 2
Recall that y.tI x; v/ w.x; v/ > 0 (resp. yk .tI x; v/ w.x; v/ > 0) if and only if
t > t.x; v/. (resp. t > tk .x; v/.) As ci > t.x; v/, we have there exists a positive
constant C > 0 such that y.ci I x; v/ w.x; v/ C for any .x; v/ 2 Vi . Hence,
for sufficiently large k, yk .ci I x; v/ w.x; v/ > 0 for any .x; v/ 2 Vi . Therefore,
ci > tk .x; v/, and thus tk .x; v/ is in the domain of y.I x; v/.
Now, define
M1 D inf f..gk .y/ x/v .gk .y/ v/x/ w.x; v/g;

k2N;.x;v/2Vi ;y2Ci
M2 D min f..g.y/ x/v .g.y/ v/x/ w.x; v/g:

.x;v/2Vi ;y2Ci
By Lemma 2, when x is not proportional to v,
..gk .y/ x/v .gk .y/ v/x/ w.x; v/ D A.x; v/2 .gk .y/ v/ > 0;
..g.y/ x/v .g.y/ v/x/ w.x; v/ D A.x; v/2 .g.y/ v/ > 0:
Because gk ! g uniformly on Ci , we can show that M1 ; M2 > 0. As

both y.t.x; v/I x; v/ and yk .tk .x; v/I x; v/ are proportional to v, we have
y.t.x; v/I x; v/ w.x; v/ D yk .tk .x; v/I x; v/ w.x; v/ D 0. If t.x; v/ tk .x; v/,
then
Z t .x;v/
yk .t.x; v/I x; v/ w.x; v/ D yPk .tI x; v/ w.x; v/dt
tk .x;v/
Z t .x;v/
M1 dt
tk .x;v/
D M1 .t.x; v/ tk .x; v//:
Hence, we have
1
t.x; v/ tk .x; v/ C yk .t.x; v/I x; v/ w.x; v/:
M1
Similarly, if t.x; v/ tk .x; v/, then

Z tk .x;v/
y.tk .x; v/I x; v/ w.x; v/ D P x; v/ w.x; v/dt
y.tI
t .x;v/
Z tk .x;v/
M2 dt
t .x;v/
D M2 .tk .x; v/ t.x; v//:
Hence, we have
1
t.x; v/ tk .x; v/ y.tk .x; v/I x; v/ w.x; v/:
M2
Now, y.t.x; v/I x; v/ is proportional to v, and thus y.t.x; v/I x; v/ w.y; z/ D 0.

Hence, by Eq. (1), for any c > 0,
max jyk .t.x; v/I x; v/ w.x; v/j

.x;v/2Vi
D max j.yk .t.x; v/I x; v/ y.t.x; v/I x; v// w.x; v/j

.x;v/2Vi
max kyk .t.x; v/I x; v/ y.t.x; v/I x; v/kkw.x; v/k

.x;v/2Vi
c;
for sufficiently large k. Similarly,
max jy.tk .x; v/I x; v/ w.x; v/j

.x;v/2Vi
D max j.yk .tk .x; v/I x; v/ y.tk .x; v/I x; v// w.x; v/j
.x;v/2Vi
max kyk .tk .x; v/I x; v/ y.tk .x; v/I x; v/kkw.x; v/k
.x;v/2Vi
c;
for sufficiently large k. For such k, we have jt.x; v/ tk .x; v/j c

M3 , where
M3 D minfM1 ; M2 g. Then, if c > 0 is sufficiently small,
kyk .tk .x; v/I x; v/ yk .t.x; v/I x; v/k

Z
tk .x;v/

D yPk .tI x; v/dt
t .x;v/
Z
tk .x;v/

max k.g.y/ x/v .g.y/ v/xkdt
t .x;v/ y2Ci
52 Y. Hosoya
c
max k.g.y/ x/v .g.y/ v/xk
y2Ci M3
kvk"
;
2
which completes the proof.
Lemmas 1 and 3 ensure that the claim of Theorem 1 holds. This completes the
proof of Theorem 1.
Appendix 2: Proof of Theorem 2
Define h.q/ D f .q 1 ; : : : ; q n1 ; 1; q n / and hk .q/ D fk .q 1 ; : : : ; q n1 ; 1; q n /. Then

all h; hk W RnCC ! RnCC are invertible18 and, for any q 2 RnCC , there exists a
neighborhood U of q such that
lim sup khk .r/ h.r/k D 0; (4)

k!1 r2U
lim sup kDhk .r/ Dh.r/k D 0: (5)

k!1 r2U
Moreover, by the rank condition, we have all Dh.q/; Dhk .q/ are regular.19 Clearly,
lim kDhk .q/1 Dh.q/1 k D 0

k!1
for any q 2 RnCC .

Next, choose any x 2 and corresponding q 2 RnCC such that h.q/ D x. Then,
there exists k0 2 N such that some neighborhood of q is included in the domain of
hk for any k k0 . We now introduce a lemma.
Lemma 4. For any sufficiently small > 0, there exists M > 0 such that kh.r/
h.q/k or khk .r/ hk .q/k for some k k0 implies kr qk M .
Moreover, M can be chosen independent to .
Proof. Let

.r/ D Dh.q/.r q/ .h.r/ h.q//;

k .r/ D Dhk .q/.r q/ .hk .r/ hk .q//:
18
That is, all h; hk are bijective. Injectivity follows from the uniqueness of the inverse demand
function. Surjectivity arises from the surjectivity and homogeneity of f and fk .
19
See the mathematical appendix of Samuelson [14], or the proof of Proposition 1 in Hosoya [6].
Then, by the assumption of convergence of hk , M D 2 supfkDh.q/1 k;

kDhk0 .q/1 k; : : :g < C1. Since D
.r/ D Dh.q/ Dh.r/ and D
k .r/ D
Dhk .q/ Dhk .r/, for any sufficiently small > 0, kr qk M implies that r
is included in the domain of hk for any k k0 and20
1
supfkDh.q/1 kkD
.r/k; kDhk0 .q/1 kkD
k0 .r/k; : : :g :
2
Now, let S D fsjksk M g and choose any r 2 1

M
S . Define,
r .s/ D Dh.q/1 .r C
.s C q//; rk .s/ D Dhk .q/1 .r C
k .s C q//:
Then, if s 2 S ,
kr .s/k kDh.q/1 kkrk C kDh.q/1 kk

.s C q/k
M
C kDh.q/1 kkD
.ts C q/kksk
2
M 1
C M M ;
2 2
where t 2 0; 1.21 Hence, r .S / S . Moreover,
kr .s1 / r .s2 /k kDh.q/1 kk

.s1 C q/
.s2 C q/k
1
kDh.q/1 kkD
.s3 C q/kks1 s2 k ks1 s2 k;
2
where s3 2 s1 ; s2 .22 Hence, r is a contraction. By contraction mapping fixed point

theorem, there uniquely exists s 2 S such that r .s/ D s, that is,
s D Dh.q/1 r C s Dh.q/1 .h.s C q/ h.q//;
and thus h.s C q/ D h.q/ C r. Because h is an injection, we have kh.s C q/

h.q/k implies ksk M . Similarly, we have khk .s C q/ hk .q/k implies
ksk M . This completes the proof of Lemma 4.
Note that y D h.r/ if and only if r D .g1 .y/; : : : ; g n1 .y/; g.y/ y/ and y D
hk .r/ if and only if r D .gk1 .y/; : : : ; gkn1 .y/; gk .y/ y/. For any " > 0 there exists
20
See Eq. (5).
21
Use the mean value theorem for k.t / D
.t s C q/.
22
Again, use the mean value theorem for k.t / D
..1 t /s1 C t s2 C q/.
54 Y. Hosoya
> 0 such that kh.r/ h.q/k or khk .r/ hk .q/k for some k k0 implies
kr qk M and M ". Let U D fy 2 jkx yk g. Then for any y 2 U ,
kgk .y/ gk .x/k kh1 1

k .y/ hk .x/k ":
Hence we conclude that .gk /k is equicontinuous at x. As x is an arbitrary point of

, we conclude that .gk /k is equicontinuous.
Next, we will show that gk .x/ ! g.x/ pointwise. Let h.q/ D hk .qk / D x.
It suffices to show that qk ! q. By assumption, there exists a neighborhood V
of q and k0 2 N such that V is included in the domain of hk for any k k0 .
Without loss of generality, we can assume that V is compact. By assumption, .hk /k
converges to h uniformly on V and thus, for any > 0, there exists k1 2 N such
that khk .q/ h.q/k for any k k1 . However, as h.q/ D x D hk .qk /, we
have khk .q/ hk .qk /k . Hence, by Lemma 4, if > 0 is sufficiently small, then
kq qk k M . Thus, qk ! q.
Therefore, .gk /k is equicontinuous and gk .x/ ! g.x/ for any x 2 . Fix any
x 2 and let h.q/ D x. Choose any sufficiently small > 0 such that kh.r/
h.q/k or khk .r/ hk .q/k for some k k0 implies kr qk M . Then,
if ky xk ,
kgk .y/k kh1

k .y/k C 1
kh1 1 1
k .y/ hk .x/k C khk .x/k C 1
M C sup kh1
` .x/k C 1 < C1;
`k0
and thus .gk /k is uniformly bounded on B D fy 2 jky xk g. If >

0 is sufficiently small, then B is compact. Hence, by Ascoli-Arzela theorem, any
subsequence of .gk /k has a convergent subsubsequence.
Suppose that .gk /k does not converge to g uniformly on B. Then, there exists
" > 0 and a subsequence .gm.k/ /k such that
sup kgm.k/ .y/ g.y/k ":

y2B
By the above result, there exists a uniformly convergent subsubsequence .g`.k/ /k .

Because gk converges to g pointwise, we conclude that
sup kg`.k/ .y/ g.y/k < "

y2B
for some k, a contradiction. This completes the proof.
Acknowledgements We are grateful to Toru Maruyama for his helpful comments and sugges-
tions. We would also like to express gratitude to the anonymous referee for their helpful advice.
References
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Academic, New York
Adv. Math. Econ. 19, 5789 (2015)
Least Square Regression Methods for Bermudan

Derivatives and Systems of Functions
Shigeo Kusuoka and Yusuke Morimoto
Abstract Least square regression methods are Monte Carlo methods to solve non-
linear problems related to Markov processes and are widely used in practice. In
these methods, first we choose a system of functions to approximate value functions.
So one of questions on these methods is what kinds of systems of functions one
has to take to get a good approximation. In the present paper, we will discuss on
this problem.
Keywords Computational finance Option pricing Malliavin calculus Least

square regression methods
Article Type: Research Article

Received: October 1, 2014
Revised: December 1, 2014
JEL Classification: C63, G12.

Mathematics Subject Classification (2010): 65C05, 60G40.
S. Kusuoka ()
Graduate School of Mathematical Sciences, The University of Tokyo, Komaba 3-8-1,
Meguro-ku, Tokyo 153-8914, Japan
e-mail: kusuoka@ms.u-tokyo.ac.jp
Y. Morimoto
Graduate School of Mathematical Sciences, The University of Tokyo, Komaba 3-8-1,
Meguro-ku, Tokyo 153-8914, Japan
Bank of Tokyo Mitsubishi UFJ, 2-7-1, Marunouchi, Chiyoda-ku, Tokyo
e-mail: yuusuke.morimoto@gmail.com

58 S. Kusuoka and Y. Morimoto
1 Introduction
Least square regression methods are Monte Carlo methods to solve non-linear prob-
lems related to Markov processes. These methods were introduced by Longstaff-
Schwartz [8] and Tsitsiklis-Van Roy[9] and are widely used in practice. There
are many works related to this methods. Concerning the applications for pricing
Bermudan derivatives, the convergence to a real price was proved by Clement-
Lamberton-Protter [4] and rate of convergence was studied by Belomestny [2]. In
these methods, first we choose a system of functions to approximate value functions.
So one of questions on these methods is what kinds of systems of functions one has
to take to get a good approximation. In the present paper, we will discuss on this
problem. Related topics have been discussed by Gobet-Lemor-Warin [5] and Bally-
Pags [1].
Let .; F ; P / be a probability space, M = 1; and fGm gM mD0 be a filtration
on .; F ; P /: Let .E; B/ a measurable space and m.E/ be the set of Borel
measurable functions on E: Let pm W E B ! 0; 1; m D 0; : : : ; M 1; be
such that pm .x; / W B ! 0; 1 is a probability measure on E for any x 2 E;
and pm .; A/ W E ! 0; 1 is B-measurable for any A 2 B: Let x0 2 E and fix
it throughout. Let X W f0; 1; : : : ; M g ! E be an E-valued process such that
X0 D x0 ; Xm W ! E is Gm -measurable, m D 0; : : : ; M; and
P .XmC1 2 AjGm / D pm .Xm ; A/ a:s: A 2 B; m D 0; : : : ; M 1:
So X is a Markov process starting from x0 whose transition probability is given by

pm .x; dy/:
Let m ; m D 1; : : : ; M; be the probability law of Xm ; m D 0; 1; : : : ; M: Then 0
is the probability measure concentrated in x0 ; and
Z
mC1 .A/ D pm .x; A/m .dx/; y 2 E; m D 0; 1; : : : ; M 1:
E
Let Pm W L2 .EI dmC1 / ! L2 .EI dm /; m D 0; 1; : : : ; M 1; be a linear

operator given by
Z
.Pm f /.x/ D pm .x; dy/f .y/; f 2 L2 .EI dmC1 /:
E
Now let fm 2 L4 .EI dm /; m D 1; 2; : : : ; M: We define fQm ; fQm 2 L4 .EI dm /;

m D 0; 1; 2; : : : ; M; inductively by the following.
fQM D fM ;
Least Square Regression Methods 59
and
fQm D fQm _ fm ; fQm1 D Pm .fQm _ fm /; m D M; M 1; : : : ; 1:
Then it is well-known that
fQ0 D supfEf .X /I is a fGm gM

mD0 -stopping time with 2 f1; 2; : : : ; M g a:s:g:
fQ0 is the price of a Bermudan derivative for which exercisable times are 1; : : : ; M;
and pay-off at each time is fm .Xm /; m D 1; : : : ; M: Our concern is to compute fQ0
numerically.
Let V denote the set of finite dimensional vector subspaces of m.E/: For any
probability measure on .E; B/; let V ./ denote the subset of V such that V 2
V ./; if and only if V satisfies the following two conditions.
R
1. If g 2 V; then E g.x/4 .dx/ < 1:
2. If g 2 V and g.x/ D 0 a:e:x; then g 0:
For any probability measure on .E; B/ and V 2 V ./; we define 0 .V; / and
1 .V; / by the following.
R
g.x/4 .dx/
0 .V; / D supf R E I g 2 V n f0gg
. E g.x/2 .dx//2
Z dim
XV
1 .V I / D inff . er .x/2 /2 .dx/I fer gdim V
rD1 is an orthonormal basis
E rD1
of V as a subspace of L2 .EI d/ g:
We will show in Proposition 3 that
1 .V I / 5 .dim V /2 0 .V I / and 0 .V I / 5 1 .V I /:
.`/ .`/ .`/

Now let .X0 ; X1 ; : : : ; XM /; ` D 1; 2; : : : ; be independent identically dis-
tributed E M C1 -valued random variables such that the law of .X0` ; X1` ; : : : ; XM
`
/;
` D 1; 2; : : : ; is the same as the law of .X0 ; X1 ; : : : ; XM / under P:
.L/
For any m D 0; 1; : : : ; M 1; and L = 1; we define Dm W m.E/m.E/ !
0; 1/ by
1 X
L
.`/
.L/
Dm .g; f /.!/ D . .g.Xm.`/ .!/ f .XmC1 .!//2 /1=2 ; g; f 2 m.E/:
L
`D1
.k/
Let Vm ; k D 1; 2; : : : ; be a sequence of strictly increasing vector spaces in
S
V .m / such that 1
.k/
kD1 Vm is dense in L .EI dm / for m D 1; : : : ; M 1:
2
.L/ .L/
Now we assume that gm W ! Vm ; m D 0; 1; : : : ; M 1; L D 1; 2; : : : ;
satisfy the following.
.L/ .L/
Dm1 .gm1 .!/; gm .!/ _ fm /.!/
D inffDm1 .h; gm
.L/
.!/ _ fm /I h 2 Vm.L/ .!/g (1)
.L/
for m D 1; 2; : : : ; M: Here we let gM D fM :
.L/
We will show that such gm s always exist.
Then we will prove the following.
.L/
Theorem 1. Suppose that 1 .Vm I m /=L ! 0; as L ! 1 for m D 1; : : : ; M 1:
Then there are L 2 F ; L D 1; 2; : : : ; and random variables ZL ; L D 1; 2; : : : ;
such that
P .L / ! 1; as L ! 1;
jfQ0 g0 .!/j 5 ZL .!/;

.L/
L = 1; ! 2 L ;
and
EZL2 ; L 1=2 ! 0; as L ! 1:
Moreover, we have
EZL2 ; L 1=2
X
M 1
1
56 1 .Vm.L/ ; m /1=4 .1 C 0 .Vm.L/ ; m //1=4 jjPm fQmC1

jjL4 .EIdm /
mD1
L1=2
X
M 1
C5 jjPm fQmC1

m;V .L/ Pm fQmC1

jjL2 .EIdm / :
m
mD1
.L/
Here m;V .L/ is the orthogonal projection in L2 .E; dm / onto Vm ; m D 1; : : : ; M:
m
.L/
So roughly speaking, g0 ! f0 in probability as L ! 1 in a certain rate.
It is obvious that 0 .V I m / = 1 and 1 .V I m / = dim V for any V 2 Vm ;
m D 1; 2; : : : ; M: So the above theorem raises the following question. Can one
estimate 0 .V I / and jjPm fQmC1

m;V Pm fQmC1

jjL2 .EIdm / for V 2 V .m /? If we
.k/
can do it, we may find a sequence Vm 2 V .m / such that the convergence rate is
good.
We give an estimate when an underlying process is a 1-dimensional Brownian
motion and V is a space of polynomials in Sect. 6. Also, we introduce a random
systems of piece-wise polynomials in Sect. 8, and we give some estimates when an
underlying process is a Hrmander type diffusion process as discussed in [6]. As far

as we judge from these estimates, a usual polynomial system is not good, and such
a random system of piece-wise polynomials is better.
2 Preliminary Results
Let Pf .E E/ be the set of probability measures on .E E; B B/ whose

supports are finite subsets of E E: Let i W E E; i D 1; 2; be natural projections
given by 1 .x; y/ D x; 2 .x; y/ D y; x; y 2 E: For any 2 Pf .E E/; let
S.; I / W m.E/ m.E/ ! R be given by
Z
S.g; f I / D .g.x/ f .y//2 .dx; dy/; g; f 2 m.E/: (2)
EE
Then we have the following.

Proposition 1. Let 2 Pf .E E/: For any f 2 m.E/ and V 2 V ; let
s .f I V; / D inffS.g; f I /I g 2 V g
and
.f I V; / D fg 2 V I S.g; f I / D s .f; V; /g:

(1) .f I V; / is not empty for any f 2 m.E/ and V 2 V :
(2) Let V 2 V : If f 2 m.E/ and g 2 .f I V; /; then
Z
h.x/.f .y/ g.x//.dx; dy/ D 0 for any h 2 V:
EE
Moreover, if f1 ; f2 2 m.E/; gi 2 .fi I V; /; i D 1; 2; then
S.g1 g2 ; 0I / 5 S.0; f1 f2 I /:
(3) If f 2 m.E/; g 2 .f I V; / and gQ 2 V; then
S.g g;
Q 0I /1=2
Z
D supfj h.x/.f .y/ g.x//.dx;
Q dy/jI h 2 V; S.h; 0I / D 1g:
EE
Proof. (1) It is easy to see that
S.g; f I / = S.0; f I / C S.g; 0I / 2S.g; 0I /1=2 S.0; f I /1=2 ; g 2 V:
Let V0 D fg 2 V I S.g; 0I / D 0g D fg 2 V W g.x/ D 0 for -a.e. .x; y/ 2

E Eg: Then it is easy to see that V0 is a vector subspace of V: So there is a
vector subspace V1 of V such that V0 C V1 D V and V0 \ V1 D f0g: It is easy
to see that g 2 V1 ! S.g; f I A/ is a continuous function from V1 to 0; 1/
and that S.g; f I A/ ! 1 as g ! 1 in V1 : So we see that there is a minimum
point g0 2 V1 : Note that S.g C h; f I / D S.g; f I / for any g 2 V and
h 2 V0 : Therefore we see that S.g0 ; f I / D s .f I V; / and that .f I V; / is
not empty.
(2) Let g 2 .f I V; /: The first assertion is obvious, since
Z
d
0D S.g C th; f I /jt D0 D h.x/.f .y/ g.x//.dx; dy/
dt EE
for any h 2 V:
Let fi 2 m.E/; gi 2 .fi I V; /; i D 1; 2: Then we have
S.g1 g2 ; f1 f2 I /
D S.g1 g2 ; 0I / C S.0; f1 f2 I /
Z
2 .g1 .x/ g2 .x//.f1 .y/ g1 .x/ .f2 .y/ g2 .x///.dx; dy/:
EE
By the first assertion, we see that
S.0; f1 f2 I / D S.g1 g2 ; f1 f2 I / C S.g1 g2 ; 0I /:
So we have the second assertion.

(3) Let g 2 .f I V; / and gQ 2 V: Then we have
S.gQ C h; f I /
Z
D S.g;
Q f I / C S.h; 0I / 2 h.x/.f .y/ g.x//.dx;
Q dy/:
EE
Let
Z
c D supf h.x/.f .y/ g.x//.dx;
Q dy/I h 2 V; S.h; 0I / D 1g = 0:
EE
Then we see that
s .f I V; / D S.g;
Q f I / C inf.t 2 2tc/ D S.g;
Q f I / c 2 :
t =0
Also, we have by Assertion (2)
Q f; / D S.g C .gQ g/; f I / D S.g; f I / C S.gQ g; 0 W /

S.g;
D s .f I A; V / C S.gQ g; 0 W /:
So we see that c 2 D S.gQ g; 0 W /: This implies our assertion.

For any m D 1; 2; : : : ; M; V 2 V .m /; and 2 Pf .E E/; let
Z
m .V I / D supfjS.h; 0I / 1jI h 2 V; h.x/2 m .dx/ D 1g:
E

Proposition 2. Let m D 1; 2; : : : ; M; V 2 V .m /; and 2 Pf .E E/: Let
fek I k D 1; : : : ; dim V g be an orthonormal basis of V: Here we regard V as a
Hilbert subspace of L2 .E; B.E/; dm /; and so we have
Z
ei .x/ej .x/m .dx/ D ij ; i; j D 1; : : : ; dim V:
E
Let A be a .dim V / .dim V /-symmetric matrix valued function defined in E given

by
A.x/ D .Aij .x//dim

i;j D1 D .ei .x/ej .x//i;j D1 ;
V dimV
x 2 E:
Then m .V I / is equal to the operator norm of the dim V dim V -symmetric

matrix AN I: Here I is the identity matrix and AN D .ANij /dim V
i;j D1 ; where
Z
ANij D ei .x/ej .x/.dx; dy/; i; j D 1; : : : ; dim V :
E
In particular,
XV
dim Z
m .V I /2 5 . .ei .x/ej .x/ ij /.dx; dy//2 :
i;j D1 E
Proof. It is easy to see that
XV
dim X
dimV
m .V I / D supfjS. ai ei ; 0I / 1jI ai2 D 1g
i D1 i D1
XV
dim XV
dim
D supfj ai aj .ANij ij /jI ai2 D 1g:
i;j D1 i D1
Since AN I is symmetric, we see our assertion.

Proposition 3. For any probability measure on .E; B/; and V 2 V ./;
1 .V; / 5 .dim V /2 0 .V; /
and
0 .V; / 5 1 .V; /:
Proof. Let fer gdim V

rD1 be an orthonormal basis of V: Then we see that
Z XV
dim Z XV
dim
. er .x/2 /2 .dx/ 5 .dim V /. er .x/4 /.dx/ 5 .dim V /2 0 .V; /:
E rD1 E rD1
So we have the first assertion.

Let g 2 V: Then we have
Z Z XV
dim
g.x/4 .dx/ D . .g; er /L2 .d/ er .x//4 .dx/
E E rD1
Z XV
dim XV
dim
5 . .g; er /2L2 .d/ /2 . er .x/2 /2 .dx/:
E rD1 rD1
Note that
XV
dim Z
.g; er /2L2 .d/ D g.x/2 .dx/:
rD1 E
So we have the second assertion.
3 Random Measures
.L/
For m D 1; : : : ; M; and L = 1; let m be a random probability measure belonging
to Pf .E E/ given by
1 .`/
.L/
m .A/ D #f` 2 f1; : : : ; LgI .Xm1 ; Xm.`/ / 2 Ag; A 2 B B:
L
.L/
For any m D 0; 1; : : : ; M 1; and L = 1; we define Nm W m.E/ ! 0; 1/
by
1 X
L
Nm.L/ .f /.!/ D . f .Xm.`/ .!//2 /1=2 :
L
`D1
Then we see that

.L/
Nm1 .g/ D S.g; 0I m
.L/
/; g 2 m.E/; m D 1; : : : ; M:

Proposition 4. Let m D 1; : : : ; M 1; L = 1; and V 2 V .m /: Then we have the
following.
.L/
(1) If m .V I m / 5 1=2; then
Z
1 .L/ .L/
N .g/2 5 g.x/2 m .dx/ 5 2Nm1 .g/2 ; g 2 V:
2 m1 E
(2)
1
Em .V I m / 5
.L/ 2
1 .V; m /:
L
In particular, we have
1 4
P .m .V I m
.L/
/> / 5 1 .V; m /:
2 L
.L/ R
Proof. (1) Suppose that m .V I m / 5 1=2: If h 2 V and E h.x/2 m .dx/ D 1;
then from the definition we have
1 .L/
5 Nm1 .h/2 5 2:
2
So we have our assertion.
(2) Let fer gdim V
rD1 be an orthonormal basis of V: It is easy to see that
XV
dim
1X
L
Em .V I m / 5
.L/ 2
E. .er .Xm` /er 0 .Xm` / r;r 0 //2
L
r;r 0 D1 `D1
dim V Z dim V Z
1 X 1 X
D .er .x/er 0 .x/ r;r 0 / m .dx/ 5
2
er .x/2 er 0 .x/2 m .dx/:
L 0 E L 0 E
r;r D1 r;r D1
Z XV
dim
1
D . er .x/2 /2 m .dx/:
L E rD1
So we have the first part of our assertion. The second part is an easy
consequence of Chebyshevs inequality.
For any m D 1; 2; : : : ; M 1; and V 2 V .m /; let O m;V W m.E/Pf .E E/ !

V be defined by the following. g D O m;V .f; /; f 2 m.E/; 2 Pf .E E/; if
g 2 .f; V I / and
Z Z
g.x/2 m .dx/ D inff Q 2 m .dx/I gQ 2 .f; V I /g:
g.x/
E E
O m;V is well-defined by Proposition 1 and the definition of V .m /:

Let F W E ! R be B F -measurable function. Then it is easy to see that
.L/
the mapping ! 2 ! s .F .; !/; V; m .!// is F -measurable. So we see that the
mapping ! 2 ! O m;V .F .; !/; m .!// is also F -measurable (see Castaing [3]
.L/
for example).
For V 2 V .m /; m D 1; : : : ; M; let m;V W L2 .EI dm / ! V be the orthogonal
projection onto V:
Proposition 5. Let m D 1; : : : ; M 1; and L = 1: Then for V 2 Vm and f 2
L4 .E; B.E/; dmC1 /; we have
1
ENm.L/ . m;V Pm f O m;V .f I m
.L/ 2 .L/
// ; m .V; m /5
2
Z
8
5 .1 .V; /.1 C 0 .V; ///1=2 . f .y/4 mC1 .dy//1=2 :
L E
Proof. Let g D m;V Pm f; and fer gdim V

rD1 be an orthonormal basis of V: Note that
Z
Eer .Xm1 /.f .XmC1
1
/ g.Xm1 // D er .x/.f .y/ g.x//m .dx/pm .x; dy/
EE
Z
D er .x/.Pm f .x/ g.x//m .dx/ D 0; r D 1; : : : ; dim V:
E
By Proposition 1(3) we see that
1
ENm.L/ .g O m;V .f I m
.L/ 2 .L/
// ; m .V; m /5
2
Z Z
.L/
5 2Esupfj h.x/.f .y/g.x//mC1 .dx; dy/j I h 2 V; h.x/2 m .dx/D1g
2
EE E
XV
dim Z XV
dim
.L/
D 2Esupfj ar er .x/.f .y/ g.x//mC1 .dx; dy/j2 I ar2 D 1g
rD1 EE rD1
XV
dim Z
.L/
D 2E . er .x/.f .y/ g.x//mC1 .dx; dy//2
rD1 EE
XV
dim
1 X
L
D2 E. er .Xm` /.f .XmC1
`
/ g.Xm` ///2
rD1
L
`D1
2 X
dim V
D Eer .Xm1 /2 .f .XmC1
1
/ g.Xm1 //2
L rD1
dim V Z
2 X
D er .x/2 .f .y/ g.x//2 m .dx/pm .x; dy/
L rD1 EE
Z XV
dim Z
2
5 . . er .x/2 /2 m .dx//1=2 . .f .y/ g.x//4 m .dx/pm .x; dy//1=2 :
L E rD1 EE
Note that
Z Z
.f .y/g.x//4 m .dx/pm .x; dy/516 .f .y/4 Cg.x/4 /m .dx/pm .x; dy/
EE EE
Z Z
D16. f .y/4 mC1 .dy/C g.x/4 m .dx//:
E E
By Proposition 3, we see that

Z Z
g.x/ m .dx/ 5 0 .V; m /.
4
.Pm f /.x/2 m .dx//2
E E
Z
5 0 .V; m / f .y/4 mC1 .dy/:
E

The following is obvious.
Proposition 6. Let m D 1; : : : ; M; and L = 1: Then for any f 2
L2 .E; B.E/; dm /; we have
Z
ENm.L/ .f /2 D f .x/2 m .dx/:
E
4 Proof of Theorem 1
Now let us think of the setting in Introduction. Let m W E R ! R; m D 1; : : : ; M;

be given by
m .x; z/ D fm .x/ _ z; x 2 E; z 2 R; m D 1; 2; : : : ; M:
Then we see that
jm .x; z1 / m .x; z2 /j 5 jz1 z2 j; x 2 E; z1 ; z2 2 R; m D 1; : : : ; M:
Note that
fQm .x/ D m .x; fQm .x// and fQm1 D Pm1 fQm ; m D 1; : : : ; M:
.L/ .L/
Remind that Vm 2 V .m /; L = 1; m D 1; : : : ; M: Let us take gm W !
.L/
Vm ; m D M; : : : ; 0; such that
.L/
gM .!/ D fM ;
.L/
.L/
gm .!/ 2 .mC1 .; gmC1 .!/.//; Vm.L/ I m
L
.!//; m D M 1; : : : ; 0:
Then we see that Eq. (1) is satisfied. Let ZQ m ; m D 0; 1; : : : ; M 1; be given by

.L/
ZQ m
.L/
D Nm.L/ .Pm fQmC1

m;V .L/ Pm fQmC1

/CNm.L/ . m;V .L/ Pm fQmC1

O m;Vm;L .fQmC1

I m
L
//:
m m
.L/
Also, let Zm ; m D 0; 1; : : : ; M 1; be given by
X
M 1
ZQ k ;
.L/ .L/
Z0 D
kD0
and
.L/
Zm
X
M 1
D jjfQm m;V .L/ fQm jjL2 .E;d m / C 2Nm .fQm m;V .L/ fQm ; !/ C 2 ZQ k ;
.L/
m m
kDm
m D 1; : : : ; M 1: Finally, let
\
M 1
1
L D fm .Vm.L/ I m
.L/
/5 g:
mD1
2

Proposition 7. (1) jfQ0 g0 .!/j 5 Z0 :
.L/ .L/
(2) For any ! 2 ;

.L/
jjfQm .gm
.L/
.!/ _ fm /jjL2 .EIdm / 5 jjfQm gm
.L/
.!/jjL2 .EIdm /
5 Zm
.L/
; m D 1; : : : ; M:
(3)
X
M 1
4 .L/
P . n L / 5 1 .Vk ; k /;
L
kD1
and
j ; L 1=2
.L/ 2
EjZm
X
M 1
1
f. 1 .Vk ; k /1=2 .1 C 0 .Vk ; k //1=2 g1=2 jjPk fQkC1

.L/ .L/
56 jjL4 .EIdk /
L
kD1
X
M 1
C5 jjPk fQkC1

k;V .L/ Pk fQkC1

jjL2 .EIdk / ; m D 0; 1; : : : ; M 1:
k
kD1
Proof. Note that
Nm.L/ .fQm gm

.L/
.!/; !/
5Nm.L/ .Pm fQmC1

O m;Vm;L .fQmC1

I m
L
/; !/CNm.L/ .O m;Vm;L .fQmC1

I m
L .L/
//gm .!/; !/:
By Proposition 1(2), we have
Nm.L/ .O m;Vm;L .fQmC1

I m
L
// gm
.L/
.!/; !/
5 NmC1 .mC1 .; fQmC1 .// mC1 .; gmC1 .!/.//; !/

.L/ .L/
5 NmC1 .fQmC1 gmC1 .!/./; !/:

.L/ .L/
So we see that
X
M 1
Nm.L/ .fQm gm Nk .Pk fQkC1

O k;Vk;L .fQkC1

.L/
.L/
.!/; !/ 5 I kL /; !/:
kDm
Then we have
X
M 1
Nm.L/ .fQm gm ZQ k :
.L/
.L/
.!/; !/ 5
kDm
In particular,
X
M 1
jfQ0 g0 .!/j 5 ZQ k D Z0 :
.L/ .L/ .L/
kD0
This implies Assertion (1).

Also, we see that if ! 2 L ; then
jjfQm gm
.L/
.!/jjL2 .E;d m /
5 jjfQm m;V .L/ fQm jjL2 .E;d m / C jj m;V .L/ fQm gm

.L/
.!/jjL2 .E;d m /
m m
5 jjfQm m;V .L/ fQm jjL2 .E;d m / C Nm.L/ . m;V .L/ fQm gm
.L/
.!/; !/
m m
5 jjfQm m;V .L/ fQm jjL2 .E;d m / j C 2Nm .fQm m;V .L/ fQm ; !/
m m
C2Nm.L/ .fQm .L/

gm .!/; !/:
This implies Assertion (2).

The first assertion of (3) is obvious from Proposition 4. By Propositions 5 and 6,
we have
E.ZQ m
.L/ 2
/ ; L 1=2
5 jjfQm m;V .L/ Pm fQm jjL2 .E;d m /
m
1
C3. .1 .V; /.1 C 0 .V; //1=2 /1=2 jjfQmC1

jjL4 .EIdmC1 / :
L
So we have the second assertion of (3).
Theorem 1 follows from Proposition 7 immediately.
The following is an easy consequence of Proposition 7.
.L/
Proposition 8. Assume that 1 .Vm I m /=L ! 0; L ! 1; m D 1; : : : ; M 1:
Let 2 .0; 1/; and let
X
M 1
dL D .L/ 2
E.Zm / ; L 1=2 ; L = 1;
mD0
Q 2 F ; L = 1; be given by
and let L
\
M 1
Q L D L \
fZm
.L/
5 dL1 g:
mD1
Q / ! 1; L ! 1: Also, we have
Then dL ! 0; and P . L
jjfQm gm .!/jjL2 .EIdm / 5 dL1 ; Q L ; L = 1:

m D 1 : : : ; M; ! 2
5 Re-simulation
Let us be back to the situation in Introduction. Let hm 2 L2 .EI dm /; m D

1; : : : ; M; with hM D fM : Let a stopping time given by D minfk D
0; 1; : : : ; M I fk .Xk / = hk .Xk /g; and let
M 1
c0 D c0 .fhm gmD1 / D Ef .X /:

Proposition 9. Let = 0: Assume that there is a C0 > 0 such that
m .fjfm fQm j 5 "g/ 5 C0 " ; " > 0; m D 1; 2; : : : ; M:
Then we have
X
M 1
jfQ0 c0 j 5 .C0 C 1/ jjfQm hm jjL2 .EId
1C=.2C/
:
m/
mD1
Proof. Let hO m ; m D M; M 1; : : : ; 0; be inductively given by
hO M D fM D hM ;
hO m1 D Pm1 .1ffm =hm g fm C 1ffm <hm g hO m /; m D M; M 1; : : : ; 1:
Then we see that c0 D hO 0 :

Note that
fQm1 D Pm1 .1ffm =fQm g fm C 1ffm <fQm g fQm /; m D M; M 1; : : : ; 1:

Therefore we have
fQm1 hO m1
D Pm1 .1ffm <fQm ^hm g .fQm hO m /C1fhm 5fm <fQm g .fQm fm /C1ffQm 5fm <hm g .fm hO m //
D Pm1 .1ffm <hm g .fQm hO m /C1fhm 5fm <fQm g .fQm fm /C1ffQm 5fm <hm g .fm fQm //;
and so we see that
jfQm1 hO m1 j
5 Pm1 .jfQm hO m j/ C Pm1 .1fjfm fQm j5jfQm hm jg jfm fQm j/
5 Pm1 .jfQm hO m j/CPm1 .1fjfm fQm j5"g jfm fQm j/CPm1 .1f"<jfQm hm jg jfQm hm j/
So we have
jjfQm1 hOm1 jjL1 .EIdm1 /
5 jjfQm hO m jjL1 .EIdm / C "m .fjfm fQm j 5 "g/ C "1 jjfQm hm jj2L2 .EIdm1 /
5 jjfQm hO m jjL1 .EIdm / C C0 "1C C "1 jjfQm hm jj2L2 .EIdm /
So letting
" D jjfQm hm jjL2 .EId / ;

2=.2C/
m
we have
jjfQm1 hO m1 jjL1 .EIdm1 / 5 jjfQm hO m jjL1 .EIdm / C .C0 C 1/jjfQm hm jjL2 .EIdm / :
1C=.2C/
Since fQM D hO M D hM D fM ; we have our assertion.

Now let XQ n D .XQ 0n ; XQ1n ; : : : ; XQM
n
/; n D 1; 2; : : : ; be independent identically dis-
M C1
tributed E -valued random variables whose distribution is the same as .X0 ; X1 ;
: : : ; XM / under P: We assume that fXm I m D 0; 1; : : : ; M g; fXm` ; m D
0; 1; : : : ; M; ` = 1g and fXQ mn I m D 0; 1; : : : ; M; n =g are independent. Let
.L/ .L/
gm .!/ 2 Vm ; m; L = 1; as in Introduction. Let
n .!/ D minfm = 0I gm .!/.XQmn .!// = fm .XQmn .!//g; n = 1;
and let
1X
n
cQ0n .!/ D fk .!/ .XQkk .!/ .!//
n
kD1
Then by law of large number, we have

M 1
cQ0n .!/ ! c0 .fgm
.L/
.!/gmD1 / a:s:; n ! 1:
By Proposition 7, we see that
jfQ0 g0 .!/j 5 dL ;
.L/
! 2 L :
But Propositions 8 and 9 imply that
jfQ0 c0 .fgm .!/gmD1

M 1 Q L ;
.1/.1C=.2C//
/j 5 CdL ; !2
even though is unknown. So cQ0n .!/ can be a better estimator of fQ0 :
6 Brownian Motion Case
From now on, we try to give estimates for 0 .V; / and jjPm fQmC1

m;V Pm fQmC1

jj
for some examples.
Let fBt I t = 0g be a standard Brownian motion and T > 0: Now let Vn ; n = 1;
be the space of polynomials of degree less than or equal to n: Let Pt ; t = 0; be the
diffusion operators for the standard Brownian motion, i.e.,
Z
1 1=2 .x y/2
.Pt g/.x/ D . / g.y/ exp. /dy; g 2 m.R/:
2 t R 2t
Let be a probability law of BT : So we have
1 x2
.dx/ D p exp. /dx:
2 T 2T

Proposition 10. We have
1 1
lim log 0 .Vn ; / D lim log 1 .Vn ; / D log 9:
n!1 n n!1 n
Also, let f W R ! 0; 1/ be given by f .x/ D x _ 0; x 2 R: Then there is a

C0 > 0 such that
jjPt f n Pt f jjL2 .d/ = C0 n3=4 .1 C t=T /n=2 ; n = 1:
Here n is the orthogonal projection in L2 .R; d/ onto Vn :

Proof. Let
x2 d n x2
Hn .xI v/ D exp. / n exp. /; x 2 RN ; v > 0; n = 0:
2v dx 2v
Then we have
1 n
X t x2 .x C t/2 xt t2
Hn .xI v/ D exp. / exp. / D exp. /;
nD0
n 2v 2v v 2v
and
X1
tn sm x.t C s/ t 2 C s 2
Hn .xI v/ Hm .xI v/ D exp. /:
n;mD0
n n v 2v
So we have
X1 Z
t n sm
Hn .xI T /Hm .xI T /.dx/
n;mD0
n n R
X1
.t C s/2 t 2 C s 2 ts t nsn
D exp. / D exp. / D ;
2T 2T T nD0
nT n
and
Z
n
Hn .xI T /Hm .xI T /.dx/ D nm :
R Tn
n
So we see that en .xI T / D . Tn /1=2 Hn .xI T /; n D 1; 2; : : : ; is an orthonormal basis
in L2 .R; d/:
Note that
1 P4 P4
X Y 4
tini Y
4
x. 2
i D1 ti / i D1 ti
. / Hni .xI v/ D exp. /:
n1 ;n2 ;n3 ;n4 D0
n i D1
i D1 i
v 2v
and so
1
X Y 4 Z Y4
tini
Hn .xI T /.dx/
n1 ;n2 ;n3 ;n4
n R i D1 i
D0 i D1 i
P4 P4
. 2 2 X
i D1 ti / i D1 ti 1
D exp. / D exp. ti tj /:
2T 2T T
15i <j 54
So we have
Z X
1 dn dn 1
Hn .xI T /4 .dx/ D n n . 2n . ti tj /2n //jt1 DDt4 D0 :
R .2n/ dt4 dt1 T
15i <j 54
Note that
X
ti tj D t1 .t2 C t3 C t4 / C t2 .t3 C t4 / C t3 t4
15i <j 54
and so we have
dn X .2n/
.. ti tj /2n /jt1 D0 D .t2 C t3 C t4 /n .t2 .t3 C t4 / C t3 t4 /n ;
dt1n n
15i <j 54
d dn
n X
.. ti tj /2n /jt1 Dt2 D0
dt2n dt1n
15i <j 54
!
.2n/ X n n
n
n
D .t3 C t4 /k .t3 C t4 /k .t3 t4 /nk
n k k .n k/
kD0
!2
X
n
n
D .2n/ .t3 C t4 /2k .t3 t4 /nk :
k
kD0
So we have
!2 !
dn dn X X
n
n 2k
n n.
2n
ti tj / /jt1 DDt4 D0 D .2n/.n/ 2
:
dt4 dt1 k k
15i <j 54 kD0
Therefore we see that

Z Z !2 !
Tn X
n
n 2k
en .xI T / .dx/ D . /2
4
Hn .xI T / .dx/ D
4
:
R n R k k
kD0
Let
n
an D log. /; n = 0:
nn1=2 e n
Then it is well known that fan g1

nD1 is bounded.
Since
1
log.n/ D n log n n log n C an ;
2
we have
!2 ! ! !
1 n 2k 1 n 1 2k
log. / D 2 log C log
n k k n k n k
k 1
D 2h. / C . log n C log.n k/ C log k C 2an 2ank 2ak /
n n
2k 1 1
C log 2 C . log.2k/ C log k C a2k 2a2k /;
n n 2
where
h.x/ D .x log x C .1 x/ log.1 x//; x 2 0; 1:
Also, we have
!2 ! !2 !
1 n 2k 1 X
n
n 2k
max log. / 5 log. /
kD0;1;:::;n n k k n k k
kD0
!2 !
1 n 2k 1
5 max log. / C log.n C 1/:
kD0;1;:::;n n k k n
So we have
!2 !
1
nX n 2k
log. / ! max .2h.x/ C 2x log 2/ D log 9; n ! 1:
n k k x20;1
kD0
Therefore we have by Proposition 3

Z
1
log. en .xI T /4 .dx// ! log 9; n ! 1:
n R
Since
Z
en .xI T /4 .dx/ 5 0 .Vn ; /
R
and
n Z
X
0 .Vn ; / 5 1 .Vn ; / 5 .n C 1/ ek .xI T /4 .dx/
kD0 R
Z
5 .n C 1/2 max ek .xI T /4 .dx/;
kD0;:::;n R
we see that
1 1
lim log 0 .Vn ; / D lim log 1 .Vn ; / D log 9:
n!1 n n!1 n
d2
Note that dx 2
f .x/ D .x/: So we have
d2 1 x2
.Pt f /.x/ D p exp. /:
dx 2 2 t 2t
Then we have
1
X Z
sn
HnC2 .xI T /.Pt f /.x/.dx/
nD0
n R
1
X Z
sn 1 d nC2 x2
D p nC2
.exp. //.Pt f /.x/dx
nD0
n 2 T R dx 2T
1 n
X Z
s 1 dn x2 d 2
D p n
.exp. // 2 .Pt f /.x/dx
nD0
n 2 T R dx 2T dx
Z
1 1 sx s2 x2 x2
Dp p exp. / exp. / exp. /dx
2 t 2 T R T 2T 2T 2t
1 tT s 2 s2 1 s2
Dp exp. 2 /D p exp. /:
2 .T C t/ 2T .T C t/ 2T 2 .T C t/ 2.T C t/
So we have
Z
1 .2m/ 1
H2mC2 .xI T /.Pt f /.x/.dx/ DD p . /m
R 2 .T C t/ m 2.T C t/
and so
Z
e2mC2 .xI T /.Pt f /.x/.dx/
R
T 2mC2 1=2 1 .2m/ 1

D. / p . /m
.2m C 2/ 2 .T C t/ m 2.T C t/
1 1
Dp . /1=2
2 .T C t/ .2m C 1/.2m C 2/
.2m/me m .2m/1=4 exp.a2m =2/ t
T .1/m .1 C /m :
2m mm e m m1=2 exp.am / T
So we see that
Z
t m
lim m3=4 .1 C / j e2mC2 .xI T /Pt f .x/.dx/j
m!1 T R
exists and is positive. Since we see that

Z
j e2mC2 .xI T /Pt f .x/.dx/j2 5 jjPt f 2m Pt f jj2L2 .d/ ;
R
we have our assertion.
7 A Remark on Hrmander Type Diffusion Processes
Let N; d = 1: Let W0 D fw 2 C.0; 1/I Rd /I w.0/ D 0g; F be the Borel algebra

over W0 and be the Wiener measure on .W0 ; F /: Let B i W 0; 1/ W0 ! R;
i D 1; : : : ; d; be given by B i .t; w/ D wi .t/; .t; w/ 2 0; 1/ W0 : Then
f.B 1 .t/; : : : ; B d .t/I t 2 0; 1/g is a d -dimensional Brownian motion under : Let
B 0 .t/ D t; t 2 0; 1/: Let V0 ; V1 ; : : : ; Vd 2 Cb1 .RN I RN /: Here Cb1 .RN I Rn /
denotes the space of Rn -valued smooth functions defined in RN whose derivatives
of any order are bounded. We regard elements in Cb1 .RN I RN / as vector fields on
RN :
Now let X.t; x/; t 2 0; 1/; x 2 RN ; be the solution to the Stratonovich
stochastic integral equation
d Z
X t
X.t; x/ D x C Vi .X.s; x// dB i .s/: (3)
i D0 0
Then there is a unique solution to this equation. Moreover we may assume that
X.t; x/ is continuous in t and smooth in x and X.t; / W RN ! RN ; t 2 0; 1/; is a
diffeomorphism withSprobability 1.
Let A D f;g [ 1 kD1 f0; 1; : : : ; d g and for 2 A , let jj D 0 if D ;; let
k
jj D k if D . ; : : : ; / 2 f0; 1; : : : ; d gk ; and let k k D jj C cardf1 5 i 5

1 k
jjI i D 0g: Let A and A denote A n f;g and A n f;; 0g; respectively. Also,

for each m = 1; A5m ; f 2 A I k k5 mg:
We define vector fields V ; 2 A ; inductively by
V; D 0; Vi D Vi ; i D 0; 1; : : : ; d;
Vi D V ; Vi ; i D 0; 1; : : : ; d:
Here i D . 1 ; : : : ; k ; i / for D . 1 ; : : : ; k / and i D 0; 1; : : : ; d:

We say that a system fVi I i D 0; 1; : : : ; d g of vector fields satisfies the following
condition (UFG).
(UFG) There are an integer `0 and '; 2 Cb1 .RN /; 2 A ; 2 A5`

0
;
satisfying the following.
X
V D '; V ; 2 A :

2A5`
0
Let A.x/ D .Aij .x//i;j D1;:::;N ; t > 0; x 2 RN ; be a N N symmetric matrix

given by
X j
Aij .x/ D i
V .x/V .x/; i; j D 1; : : : ; N:

2A5`
0
Let h.x/ D det A.x/; x 2 RN ; and E D fx 2 RN I h.x/ > 0g: By Kusuoka-

Stroock [7], we see that if x 2 E; the distribution law of X.t; x/ under has a
smooth density function p.t; x; / W RN ! 0; 1/ for t > 0:
By Kusuoka-Morimoto [6] Propositions 3, 8 and 9, we see the following.
Proposition 11. For any p > 1 and T > 0; there is a C 2 .0; 1/ such that
Z
p.t; x; y/h.y/p dy 5 C h.x/p ; x 2 E; t 2 .0; T :
E
Proposition 12. For any T > 0; there are C 2 .0; 1/ and 0 > 0 such that
20
p.t; x; y/ 5 C t .N C1/`0 =2 h.x/2.N C1/`0 exp. jy xj2 /
t
and
20
p.t; x; y/ 5 C t .N C1/`0 =2 h.y/2.N C1/`0 exp. jy xj2 /
t
for any x; y 2 E; and t 2 .0; T :
=0 and T > 0: Then there are C 2

Proposition 13. Let 2 .0; 1=N /; ; 2 ZN
.0; 1/ such that
j@x @y p.t; x; y/j 5 C t .jjCjjC1/`0 =2 h.x/2.jjCjjC1/`0 p.t; x; y/1
and
j@x @y p.t; x; y/j 5 C t .jjCjjC1/`0 =2 h.y/2.jjCjjC1/`0 p.t; x; y/1
for any x; y 2 E; and t 2 .0; T :

Proposition 14. For any m = 1 and T > 0; there is a C 2 .0; 1/ such that
p.t; x; y/ 5 C t N `0 h.x/.4N `0 CmC1/ h.y/m ; x; y 2 E; t 2 .0; T :
Proof. Note that for any " > 0 we have
@
j .p.t; x; y/." C h.y//m /jN C1
@yi
@
5 2N C1 j p.t; x; y//jN C1 ." C h.y//m.N C1/
@yi
@h
C2N C1 mN C1 p.t; x; y/N C1 ." C h.y//.mC1/.N C1/j .y/jN C1 :
@yi
By Propositions 11 and 12, we see that

Z
N.N C1/`0 =2 2N.N C1/`0 Cm.N C1/
supft h.x/ jp.t; x; y/." C h.y//m jN C1 dyI
RN
t 2 0; T ; x 2 E; " > 0g < 1:
Also letting D 1=.N C 1/ in Proposition 13, we see by Proposition 11 that
supft .N 1/.N C1/`0 h.x/4.N 1/.N C1/`0 C.mC1/.N C1/

N Z
X @
j .p.t; x; y/." C h.y//m //jN C1 dyI
i D1 RN @yi
t 2 0; T ; x 2 E; " > 0g < 1:
These and Sobolevs inequality imply that there is a C > 0 such that
t N `0 h.x/4N `0 CmC1 p.t; x; y/." C h.y//m 5 C;
for any x 2 E; y 2 RN ; t 2 .0; T ; and " > 0: This proves our assertion.
Let Pt ; t = 0; be a diffusion operator defined in Cb1 .RN / given by
.Pt f /.x/ D Ef .X.t; x//; f 2 Cb1 .RN /:
Then we see that

Z
.Pt f /.x/ D p.t; x; y/f .y/dy; x 2 E:
E

Proposition 15. For any T > 0 and 2 ZN

=0 ; there is a C 2 .0; 1/ such that
@
j .Pt f /.x/j 5 C t .jjCN C2/`0 =2 h.x/2.jjCN C2/`0 .Pt .jf j2 /.x//1=2
@x
for any t 2 .0; T ; x 2 E and f 2 Cb1 .RN /:

Proof. By Proposition 13, we see that there is a C1 2 .0; 1/ such that for any
f 2 Cb1 .RN /
Z
@ @ p
j .Pt f /.x/j 5 j
.t; x; y/jjf .y/jdy
@x E @x

Z
.jjC1/`0 =2 2.jjC1/`0
5 C1 t h.x/ p.t; x; y/2N=.2N C1/ jf .y/jdy
E
Z
5 C1 t .jjC1/`0 =2 h.x/2.jjC1/`0 j f .y/2 p.t; x; y/dyj1=2
E
Z
j p.t; x; y/.2N 1/=.4N C2/ dyj1=2 :
E
By Proposition 12, we see that there is a C2 > 0 such that

Z
p.t; x; y/.2N 1/=.4N C2/ dy 5 C2 t .N C1/`0 =4 h.x/.N C1/`0 ; x 2 E; t 2 .0; T :
E

The following is an easy consequence of Proposition 13.
Proposition 16. For any 2 .0; 1=N / and T > 0; there is a C > 0 such that
@
j .p.t; x; y/ /j 5 C t `0 h.x/4`0 ; x 2 E; t 2 .0; T :
@y i
8 A Random System of Piece-Wise Polynomials
Let be a probability measure on RN :

For any m = 2; let
.m/
Y N
.2.ki 1/ m/ .2ki m/
DE D log m; log m/;
k
i D1
m m
for kE D .k1 ; : : : ; kN / 2 f1; : : : ; mgN : Let Dm D fD E I kE 2 f1; : : : ; mgN g: Then

.m/
S k
we have Dm D log m; log m/N :
Let X1 ; X2 ; : : : ; i.i.d. random variables defined on a probability space .; F ; P /

whose distributions are : Let Dm;n .!/; m; n =; ! 2 ; be a random sub-family of
Dm given by
Dm;n .!/ D fD 2 Dm I there is a k 2 f1; : : : ; ng such that Xk .!/ 2 D g:
Let Pr ; r D 0; 1; 2; : : : ; be the set of polynomials on RN of degree less than or

equal to r: Now let Vn;m;r .!/; m; n = 2; r = 0; ! 2 ; be a finite dimensional
vector subspace of m.RN / hulled by f 1D ; f 2 Pr ; D 2 Dm;n .!/: It is obvious
that dim Vn;m;r .!/ 5 N m .N C 1/r :
Now let us use the notation in the previous section. Let X.t; x/; t 2 0; 1/; x 2
RN ; be the solution to the SDE (3) and we assume the (UFG) condition holds. Let
x0 2 RN such that h.x0 / > 0; and so x0 2 E: Let T0 > 0 and .x/ D p.T0 ; x0 ; x/;
x 2 RN : We think of the case that .dx/ D .x/dx:
Theorem 2. Let r = 0; > 0; > 0; and T > 0; and let nm ; m D; 2; : : : ; be
integers satisfying mN C 5 nm < 2mN C : Then there are m 2 F ; m D 1; 2; : : : ;
and C 2 .0; 1/ satisfying the following.
(1) P .m / ! 1; m ! 1:
(2) For any ! 2 m ;
1
inf .x/ = sup .x/;
x2D 2 x2D
and
.D/ = C 1 m.2N C C/
for any D 2 Dm;nm .!/ and m = 2:

(3) For any ! 2 m ; 0 .Vm;nm ;r ; / 5 C m2N C C :
(4) For any ! 2 m ; f 2 Cb1 .RN / and t 2 .0; T ;
jjPt f Vm;nm ;r Pt f jjL2 .d/

Z
5 C.t .rC2N C3/`0 m.rC1/C C m=4C /. f .y/4 p.T0 C t; x0 ; y/dy/1=4 :
RN
Here Vm;n;r is the orthogonal projection in L2 .EI d/ onto Vm;n;r .!/:

We make some preparations to prove Theorem 2.
Proposition 17. For any r = 0; there is a Cr > 0 such that
Z Z
. f .y/4 dy/1=4 5 Cr "N=4 . f .y/2 dy/1=2
.";"/N .";"/N
for any " > 0 and f 2 Pr :

Proof. Let us fix n = 0: Since Pr is a finite dimensional vector space, any norms
on Pr are equivalent. So we see that there is a Cr > 0 such that
Z Z
. jf .x/j4 dx/1=4 5 Cr . jf .x/j2 dx/1=2 ; f 2 Pr :
.1;1/N .1;1/N
Then we see that

Z Z
. f .x/4 dx/1=4 D "N=4 . f ."x/4 dx/1=4
.";"/N .1;1/N
Z Z
N=4
5 Cr " N=4
. 2
f ."x/ dx/ 1=2
D Cr " . f .x/2 dx/1=2 :
.1;1/N .";"/N
This implies our assertion.

Pn
For any Borel subset A in RN and n; let Nn .A/ be Nn .A/ D kD1 1A .Xi /:
Let > 0 and 2 .0; =2/; and fix them. Let 0 D N C =3 and 1 D
.0/ .1/
2N C C =3: Now let Dm and Dm be subsets of Dm ; m = 1; given by
Dm.0/ D fD 2 Dm I .D/ = m0 g;
and
Dm.1/ D fD 2 Dm I .D/ = m1 g:
.0/ .1/
Then it is obvious that Dm Dm :
Proposition 18. (1) Let 0;m;n ; m = 2; n = 1; be the set of ! 2 such that
.0/
Dm Dm;n .!/: Then we have
P . n 0;m;n / 5 mN exp.nm.N C / m=3 /; n = 1; m = 2:
.1/
(2) Let 1;m;n ; m = 2; n = 1; be the set of ! 2 such that Dm;n .!/ Dm : Then
there is an m1 = 1 such that
P . n 1;m;n / 5 .2 log 2/nm.N C / m=3 n = 1; m = m1 :
Proof. Since .1 1=x/x ; x 2 .1; 1/ is increasing in x; we see that
1 1
5 .1 /x 5 e 1 ; x = 2:
4 x
For D 2 Dm we have
P .Nn .D/ D 0/ D .1 .D//n D ..1 .D//1=.D/ /n.D/ :

Thus we see that
P .Nn .D/ D 0/ 5 exp.n.D//
for any D 2 Dm ; and
22n.D/ 5 P .Nn .D/ D 0/
for any D 2 Dm with .D/ 2 0; 1=2: So we see that for any D 2 Dm with
.D/ 2 0; 1=2;
P .Nn .D/ = 1/ 5 1 exp..2 log 2/n.D// 5 .2 log 2/n.D/:
Note that
.D/ 5 .2m1 log m/N sup .x/:

x2RN
So there is an m1 = 1 such that .D/ 5 1=2 for D 2 Dm ; m = m1 :

Therefore we see that
X
P . n 0;m;n / 5 P .Nn .D/ D 0/ 5 mN exp.nm0 /;
.0/
D2Dm
and
X
P . n 1;m;n / 5 P .Nn .D/ = 1/ 5 .2 log 2/nmN 1 m = m1 :
.0/
D2Dm nDm
So we have our assertions.

Proposition 19. There is an m2 = 1 satisfying the following.
.1/
If D 2 Dm ; then
1
inf .x/ = sup .x/ = m.N C C2=3/ ; m = m2 :
x2D 2 x2D
Proof. Assume that D 2 Dm : Let x1 2 DN be a maximal point of .x/; x 2 D: N

.1/
Then we see that .x1 / = .2 log m/N mN =3 : Applying Proposition 16 for D
1=.2.N C C =3// > 0; we see that there is a C0 > 0 such that
j.x/ .y/ j 5 C0 jx yj; x; y 2 RN :

So we see that
2N log m
j.x/ .x1 / j 5 C0 : x 2 D;
m
and so
2N log m
.x/ = .x1 / C0
m
1 2N log m
= . .x1 // C .1 2 /.2 log m/N m1=2 C0
2 m
So we see that if m is sufficiently large
1
inf .x/ = sup .x/ = m.N C C2=3/ :
x2D 2 x2D
Thus we have our assertion.

Proposition 20. There is an m3 = 1 satisfying the following. If ! 2 1;n;m and
m = m3 ; then
0 .Vm;n;r .!/I / 5 m2N C C :
Proof. Let m2 = 1 be as in Proposition 19. Suppose that ! 2 1;n;m and m = m2 :

.1/
Then Dm;n .!/ Dm :
Let f 2 Vm;n;r .!/: Then there are fD 2 Pr ; D 2 Dm:n .!/; such that
X
f D fD 1D :
D2Dm:n .!/
Then we see that

Z X Z X Z
f .x/4 .dx/ D fD .x/ .dx/ 5
4
sup .x/ fD .x/4 dx
RN D2Dm:n .!/ D D2Dm:n .!/
x2D D
X Z
52 inf .x/Cr4 .2m1 log m/ N
. fD .x/2 dx/2
x2D D
D2Dm:n .!/
X Z
1
52 Cr4 .2m1 log m/N . fD .x/2 .dx//2
infx2D .x/ D
D2Dm:n .!/
Z
5 m2N C C .2N C1 Cr4 m=3 .log m/N /. f .x/2 .dx//2 :
RN

Proposition 21. For any r = 0; there is a C 2 .0; 1/ satisfying the following.

Z
inff. jf .x/ g.x/j2 dx/1=2 I g 2 Pr g
.";"/N
X Z
@ f
5 C "rC1 . j .x/j2 dx/1=2
.";"/N @x
2ZN
=0 ;rC15jj5rCN C1
for any f 2 C 1 .RN / and " 2 .0; 1:

Proof. By Sobolevs inequality, we see that there is a C0 > such that
X Z
@ f
sup jf .x/j 5 C0 . j .x/j2 dx/1=2 ; f 2 C 1 .RN /:
x2.1;1/N .1;1/N @x
2ZN
=0 ;jj5N
So we see that
X Z
@
sup jf .x/j 5 C0 j j .f ."x//j2 dx/1=2
x2.";"/N .1;1/N @x
2ZN
=0 ;jj5N
X Z
jjN=2 @ f
5 C0 " . j .x/j2 dx/1=2 :
.";"/N @x
2ZN
=0 ;jj5N
For any f 2 C 1 .RN /;
X Z
1 @ f t
.1 t/r d rC1
jf .x/ .0/x j 5 j rC1 f .tx/jdt
@x 0 r dt
2ZN
=0 ;jj5r
X @ f
5 jxjrC1 sup j .tx/j;
t 20;1 @x
2ZN
=0 ;jjDrC1
and so we have
Z
inff. jf .x/ g.x/j2 dx/1=2 I g 2 Pr g
.";"/N
X @ f
5 .2N "/rC1CN=2 sup j .x/j
x2.";"/N @x
2ZN
=0 ;jjDrC1
X Z
@C f
5 "rC1 C0 .2N /rC1CN=2 . j .x/j2 dx/1=2 :
..";"/N @x C
;2ZN
=0 ;jjDrC1;jj5N
This implies our assertion

.1/
Proposition 22. For any T > 0 there is an m4 = 1 such that for any D 2 Dm ;
m = m4 ;
Z
inff jPt f .x/ g.x/j2 .dx/I g 2 Pr g
D
Z
5 m2.rC1/C2=3 t .rC2N C3/`0 =2 Pt .jf j2 /.x/.dx/;
D
t 2 .0; T ; f 2 Cb1 .RN /:
Proof. Let m2 = 1 be as in Proposition 19. Then
.x/ = m.N C C2=3/ ; x 2 D; D 2 Dm.1/
for any m = m2 : By Proposition 14, there is a C0 > 0 such that
h.x/ = C0 m=.8.rC2N C3/`0 / ; x 2 D; D 2 Dm.1/ ; m = m2 :
Then by Proposition 15 we see that there is a C1 > 0 such that

X @
j Pt f .x/j 5 C1 m=4 t .rC2N C3/`0 =2 .Pt .jf j2 /.x//1=2 ;
@x
2ZN
=0 ;rC15jj5N CrC1
for any x 2 D; D 2 Dm ; m = m2 ; and f 2 Cb1 .RN /: Then by Proposition 21 we

.1/
.1/
see that there is a C2 > 0 such that for D 2 Dm ; m = m2 ;
Z
inff. jPt f .x/ g.x/j2 .dx//1=2 I g 2 Pr g
D
Z
5 .sup .x// 1=2
inff. jPt f .x/ g.x/j2 dx/1=2 I g 2 Pr g
x2D D
X Z
@
5 2. inf .x//1=2 C2 .2m1 log m/rC1 . j Pt f .x/j2 dx/1=2
x2D D @x
2ZN
=0 ;rC15jj5rCN
Z
5 2C2 .2m1 log m/rC1 C1 m=4 t .rC2N C3/`0 =2 . .Pt .jf j2 //.x/.dx//1=2 :
D

S .0/
Proposition 23. Let A0;m D Dm : Then there is an m5 = 1 such that
.RN n A0;m / 5 m C ; m = m5 :

Proof. We see by Proposition 12 that
.RN n A0;m / D . log m; log m/N n A0;m / C .RN n log m; log m/N /
X Z
D .D/ C p.T0 ; x0 ; x/dx
.0/ RN n log m;log m/N /
D2Dm nDm
Z
N 0 .N C1/`0 =2 20 jx x0 j2
5m C C T0 h.x0 /2.N C1/`0 exp. /dx:
RN n log m;log m/N / T0

Proposition 24. Let r = 0; and T > 0: There is an m6 = 2 satisfying the following.
For any ! 2 0;m;n ; m = m6 ; n = 1;
jjPt f Vm;n;r Pt f jjL2 .d/

Z
.rC2N C3/`0 =2 .rC1/C=2 =4C=2
5 .t m Cm /. f .y/4 p.T0 C t; x0 ; y/dy/1=4
RN
for any t 2 .0; T ; and f 2 Cb1 .RN /:

Proof. Let m4 ; m5 = 2 be as in Propositions 22 and 23. Let ! 2 0;m;n ; and m =
.0/
m4 _ m5 : Then we see that Dm;n .!/ Dm and so we see that
Z
inff jPt f .x/ g.x/j2 .dx/I g 2 Pr g
RN
X Z
D inff j.Pt f /.x/ g.x/j2 .dx/I g 2 Pr g
D2Dm;n .!/ D
Z
C S jPt f .x/j2 .dx/
RN n Dm;n .!/
X Z
2.rC1/C2=3 .rC2N C3/`0
5 m t Pt .jf j2 /.x/.dx/
D2Dm;n .!/ D
Z
C.R n A0;m /
N 1=2
. jPt f .x/j4 .dx//1=2
RN
Z
5 m2.rC1/C2=3 t .rC2N C3/`0 f .y/2 p.T0 C t; x0 ; y/dy
RN
Z
Cm. /=2 . f .y/4 p.T0 C t; x0 ; y/dy/1=2 :
RN
So this and Proposition 23 imply our assertion.

Now we have Theorem 2 from Propositions 18, 19, 20 and 24, letting m D
0;m;nm \ 1;m;nm :
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IEEE Trans Neural Netw 12:694703
Adv. Math. Econ. 19, 91135 (2015)
Discrete Time Optimal Control Problems on

Large Intervals
Alexander J. Zaslavski
Abstract In this paper we study the structure of approximate solutions of an

autonomous nonconcave discrete-time optimal control system with a compact
metric space of states. In the first part of the paper we discuss our recent results
for systems described by a bounded upper semicontinuous objective function which
determines an optimality criterion. These optimal control systems are discrete-
time analogs of Lagrange problems in the calculus of variations. It is known that
approximate solutions are determined mainly by the objective function, and are
essentially independent of the choice of time interval and data, except in regions
close to the endpoints of the time interval. Our goal is to study the structure of
approximate solutions in regions close to the endpoints of the time intervals. The
second part of the paper contains new results on the structure of solutions of optimal
control systems which are discrete-time analogs of Bolza problems in the calculus
of variations. These systems are described by a pair of objective functions which
determines an optimality criterion.
Keywords Good program Optimal control problem Overtaking optimal pro-

gram Turnpike property
JEL Classification: C02, C61, C67

Mathematics Subject Classification (2010): 49J99
A.J. Zaslavski ()
Department of Mathematics, The Technion Israel Institute of Technology, Technion City, Haifa
32000, Israel
e-mail: ajzasl@techunix.technion.ac.il

92 A.J. Zaslavski

Received: October 1, 2014
Revised: November 7, 2014
1 Introduction
The growing significance of the study of (approximate) solutions of variational

and optimal control problems defined on infinite intervals and on sufficiently large
intervals has been further realized in the recent years [2, 411, 16, 18, 21, 22, 24,
25, 27, 37, 38]. This is due not only to theoretical achievements in this area, but also
because of numerous applications to engineering [1, 14, 27], models of economic
dynamics [13, 17, 20, 23, 2628, 37, 38], the game theory [12, 27, 34], models of
solid-state physics [3] and the theory of thermodynamical equilibrium for materials
[15, 19]. In the present paper we analyze the structure of approximate solutions of a
discrete-time optimal control system on large intervals, describing a general model
of economic dynamics [2833, 36, 37].
More precisely, we study the structure of approximate solutions of an
autonomous nonconcave discrete-time optimal control system with a compact
metric space of states. In the first part of the paper we discuss our recent results for
systems described by a bounded upper semicontinuous objective function which
determines an optimality criterion. These optimal control systems are discrete-time
analogs of Lagrange problems in the calculus of variations. The second part of the
paper contains new results on the structure of solutions of optimal control systems
which are discrete-time analogs of Bolza problems in the calculus of variations.
These systems are described by a pair of objective functions which determines an
optimality criterion.
Let .X; / be a compact metric space and be a nonempty closed subset of
X X.
A sequence fxt g1 t D0 X is called an ./-program if .xt ; xt C1 / 2 for all
integers t 0. A sequence fxt gTt DT
2
1
X , where integers T1 , T2 satisfy 0 T1 <
T2 , is called an ./-program if .xt ; xt C1 / 2 for all integers t 2 T1 ; T2 1.
We study the problem
X
T 1
1
v.xt ; xt C1 / ! max; f.xt ; xt C1 /gtTD0 ; x0 D z1 ; xT D z2 (P1)
t D0
considered in [29, 37], the problem
X
T 1
1
v.xt ; xt C1 / ! max; f.xt ; xt C1 /gtTD0 ; x0 D z1 (P2)
t D0
Discrete Time Optimal Control Problems on Large Intervals 93
considered in [28, 37] and the problem
X
T 1
1
v.xt ; xt C1 / ! max; f.xt ; xt C1 /gtTD0 ; (P3)
t D0
which was studied in [36], where T is a natural number, z1 ; z2 2 X and v W

! R1 is a bounded upper semicontinuous objective function. These optimal
control problems are discrete-time analogs of Lagrange problems in the calculus of
variations.
In models of economic growth the set X is the space of states, v is a utility
function and v.xt ; xt C1 / evaluates consumption at moment t. The interest in
discrete-time optimal problems of types (P1)(P3) also stems from the study of
various optimization problems which can be reduced to it [3, 1315, 19, 27]. Opti-
mization problems of the types (P1)(P3) with D X X were considered in [27].
In [2833, 36, 37] we analyzed a turnpike phenomenon for the approximate
solutions of problems (P1)(P3) which is independent of the length of the interval
T , for all sufficiently large intervals. The turnpike phenomenon holds if the
approximate solutions of the optimal control problems are determined mainly by
the objective function v, and are essentially independent of T and z1 ; z2 . Turnpike
properties are well known in mathematical economics. The term was first coined by
Samuelson in 1948 (see [26]).
Problems (P1)(P3) were analyzed in [28, 29, 36, 37], where we showed, under
certain assumptions, that the turnpike property holds and that the turnpike xN is
a unique maximizer of the optimization problem v.x; x/ ! max, .x; x/ 2 .
Namely, we considered a collections of .v/-good programs which are approximate
solutions of the corresponding infinite horizon optimal control problem associated
with the objective function v. It was shown that the turnpike property holds and xN
is the turnpike if the following asymptotic turnpike property holds: the all .v/-good
programs converge to x. N
It [36] we showed that the asymptotic turnpike property holds for most cost
functions in the sense of Baire category. In other words, the asymptotic turnpike
property holds for a generic (typical) cost function.
In the first part of this paper we discuss the structure of approximate solutions of
the problems (P2) and (P3) in regions close to the endpoints of the time intervals and
present the results obtained in [39]. The results of [39] show that in regions close to
the right endpoint T of the time interval approximate solutions are determined only
by the objective function, and are essentially independent of the choice of interval
and endpoint value z1 . For the problems (P3), approximate solutions are determined
only by the objective function also in regions close to the left endpoint 0 of the time
interval.
More precisely, we define N D f.y; x/ 2 X X W .x; y/ 2 g and v.y; N x/ D
v.x; y/ for all .x; y/ 2 and consider the collection P.v/ N of all solutions of
a corresponding infinite horizon optimal control problem associated with the pair
N For given > 0 and an integer 1, we show that if T is large enough and
N /.
.v;
94 A.J. Zaslavski
fxt gTtD0 is an approximate solution of the problem (P2), then .xT t ; yt / for all
integers t 2 0; , where fyt g1
t D0 2 P.v/.
N
Moreover, using the Baire category approach, we show that for most objective
functions v the set P.v/N is a singleton.
In the second part of the paper we establish new results on the structure of
solutions of optimal control systems which are discrete-time analogs of Bolza
problems in the calculus of variations. These systems are described by a pair of
objective functions which determines an optimality criterion.
Our paper is organized as follows. Section 2 contains turnpike results for discrete-
time Lagrange problems. Section 3 contains preliminaries which we need for the
study of the structure of solutions in the regions close to the endpoints. The results
of [39], which describe the structure of solutions of Lagrange problems in the
regions close to the endpoints, are discussed in Sect. 4. The turnpike results for
discrete-time Bolza problems are proved in Sect. 5. Our results (Theorems 1518
and Propositions 17 and 18) which describe the structure of solutions of Bolza
problems in the regions close to the endpoints, are stated in Sect. 6. Section 7
contains a basic lemma for the proof of Theorem 15 which is proved in Sect. 8.
Proposition 17 is proved in Sect. 9. Section 10 contains the proof of Theorem 17.
Proposition 18 is proved in Sect. 11.
2 The Turnpike Results for Discrete-Time Lagrange

Problems
Let .X; / be a compact metric space and be a nonempty closed subset of X X .

Denote by M ./ the set of all bounded functions u W ! R1 . For each w 2
M ./ set
kwk D supfjw.x; y/j W .x; y/ 2 g: (1)
For each x; y 2 X , each integer T 1 and each u 2 M ./ set
X
T 1
.u; T; x/ D supf u.xi ; xi C1 / W fxi gTiD0 is an ./ program and x0 D xg;
i D0
(2)
X
T 1
.u; T; x; y/ D supf u.xi ; xi C1 / W
i D0
fxi gTiD0 is an ./ program and x0 D x; xT D yg; (3)
X
T 1
.u; T / D supf u.xi ; xi C1 / W fxi gTiD0 is an ./ programg: (4)
i D0
(Here we use the convention that the supremum of an empty set is 1).
For each x; y 2 X , each pair of integers T1 ; T2 satisfying 0 T1 < T2 and each

2 1
sequence fut gtTDT 1
M ./ set
2 1
TX
2 1
.fut gtTDT 1
; T1 ; T2 ; x/ D supf ut .xt ; xt C1 / W
t DT1
fxt gTt DT
2
1
is an ./ program and xT1 D xg; (5)
2 1
TX
2 1
.fut gTt DT 1
; T1 ; T2 ; x; y/ D supf ut .xt ; xt C1 / W
t DT1
fxt gTt DT
2
1
is an ./ program and xT1 D x; xT2 D yg; (6)
2 1
TX
2 1
.fut gtTDT 1
; T1 ; T2 / D supf ut .xt ; xt C1 / W fxt gTt DT
2
1
is an ./ programg;
t DT1
(7)
2 1
TX
2 1
O t gtTDT
.fu 1
; T1 ; T2 ; y/ D supf ut .xt ; xt C1 / W
t DT1
fxt gTt DT
2
1
is an ./ program and xT2 D yg: (8)
Assume that v 2 M ./ is an upper semicontinuous function. We suppose that

there exist xN v 2 X and constants cNv > 0 and rNv > 0 such that the following
assumptions hold.
(A1) f.x; y/ 2 X X W .x; xN v /; .y; xN v / rNv g and v is continuous at
.xN v ; xN v /.
(A2) .v; T / T v.xN v ; xN v / C cNv for all integers T 1:
Evidently, for each integer T 1 and each ./-program fxt gTtD0 ,
X
T 1
v.xt ; xt C1 / .v; T / T v.xN v ; xN v / C cNv : (9)
t D0
Relation (9) implies the following result.

Proposition 1. For each ./-program fxt g1
t D0 either the sequence
X
T 1
f v.xt ; xt C1 / T v.xN v ; xN v /g1
T D1
t D0
P 1
is bounded or limT !1 tTD0 v.xt ; xt C1 / T v.xN v ; xN v / D 1:
96 A.J. Zaslavski
An ./-program fxt g1
t D0 is called .v; /-good if the sequence
X
T 1
f v.xt ; xt C1 / T v.xN v ; xN v /g1
T D1
t D0
is bounded.
We suppose that the following assumption holds:
(A3) (the asymptotic turnpike property or, briefly, (ATP)) For any .v; /-good
program fxt g1 N v / D 0.
t D0 , limt !1 .xt ; x
It follows from assumptions (A1) and (A3) that if .xN v ; xN v / is not an isolated point
of X X , then kvk > 0.
Examples of optimal control problems satisfying (A1)(A3) are given in [28, 29,
37].
Denote by Card.A/ the cardinality of a set A and suppose that the sum over
empty set is zero.
Evidently, for each pair of integers T1 ; T2 satisfying 0 T1 < T2 , each sequence
2 1
fwt gtTDT 1
M ./ and each x; y 2 X satisfying .x; xN v /; .y; xN v / rNv the value
2 1
.fwt gtTDT 1
; T1 ; T2 ; x; y/ is finite.
Let T be a natural number. We denote by YT the set of all points x 2 X such that
there exists an ./-program fxt gTtD0 satisfying x0 D xN v and xT D x and denote by
YNT the set of all points x 2 X such that there exists an ./-program fxt gTtD0 such
that x0 D x and xT D xN v .
The following two theorems obtained in [32] establish the turnpike property for
approximate solutions of the optimal control problems of the types (P1) and (P2)
with objective functions ut , t D 0; : : : ; T 1 which belong to a small neighborhood
of v.
Theorem 1. Let 2 .0; rNv /, L0 be a natural number and M0 > 0. Then there
exist an integer L 1 and 2 .0; / such that for each integer T > 2L, each
1
fut gTt D0 M ./ satisfying
kut vk ; t D 0 : : : T 1;
and each ./-program fxt gTtD0 which satisfies
x0 2 YNL0 ; xT 2 YL0 ;
X
T 1
1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T; x0 ; xT / M0
t D0
and
CL1
X
CL1
ut .xt ; xt C1 / .fut gtD ; ; C L; x ; x CL /
t D
for each integer 2 0; T L there exist integers 1 2 0; L, 2 2 T L; T such

that
.xt ; xN v / ; t D 1 ; : : : ; 2 :
Moreover, if .x0 ; xN v / , then 1 D 0 and if .xT ; xN v / , then 2 D T .

Theorem 2. Let a positive number < rNv , L0 1 be an integer and M0 > 0. Then
there exist an integer L 1 and a number 2 .0; / such that for each integer
1
T > 2L, each fut gtTD0 M ./ satisfying
kut vk ; t D 0 : : : ; T 1
X
T 1
x0 2 YNL0 ; 1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T; x0 / M0
t D0
and
CL1
X
CL1
ut .xt ; xt C1 / .fut gtD ; ; C L; x ; x CL /
t D

that
.xt ; xN v / ; t D 1 ; : : : ; 2 :
Moreover if .x0 ; xN v / , then 1 D 0.

The next theorem obtained in [36] establishes the turnpike property for approxi-
mate solutions of the optimal control problems of the type (P3).
Theorem 3. Let 2 .0; rNv / and M > 0. Then there exist a positive number <
minf1; M g and a natural number L such that the following assertions hold.
1
1. Assume that an integer T L, fut gtTD0 M ./ and an ./-program fxt gTtD0
satisfy
kut vk ; t D 0; : : : ; T 1; (10)
X
T 1
1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T / M: (11)
t D0
98 A.J. Zaslavski
Then the inequality
Card.ft 2 f0; : : : ; T g W .xt ; xN v / > g/ < L
holds.
1
2. Assume that an integer T 2L, fut gtTD0 M ./ and an ./-program fxt gTtD0
satisfy (10), (11) and
X
T 1
1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T; x0 ; xT / : (12)
t D0
Then there exist integers 1 2 0; L and 2 2 T L; T such that
.xt ; xN v / ; t D 1 ; : : : ; 2 :
Moreover, if .x0 ; xN v / , then 1 D 0 and if .xT ; xN v / , then 2 D T .

3. Assume that fut g1 1
t D0 M ./ and an ./-program fxt gt D0 satisfy
kut vk for all integers t 0;
X
T 1
1
lim sup ut .xt ; xt C1 / .fut gtTD0 ; 0; T / > M:
T !1 t D0
Then
Card.ft is a nonnegative integer such that .xt ; xN v / > g/ < L:
1
4. Assume that an integer T > 0, fut gtTD0 M ./, an ./-program fxt gTtD0
satisfy (10)(12) and integers T1 ; T2 satisfy 0 T1 < T2 T . Then
2 1
TX
2 1
ut .xt ; xt C1 / .fut gtTDT 1
; T1 ; T2 / .4L C 2/.2kvk C 2/ M 1:
t DT1
Assertions 1 and 2 establish turnpike properties for approximate solutions of

the problem (P3) while Assertion 3 establish the turnpike property for approximate
solutions of the corresponding infinite horizon problem. Moreover, they also show
the stability of the turnpike phenomenon under small perturbations of the objective
function v.
In the sequel we use a notion of an overtaking optimal program [27, 37].
An ./-program fxt g1 t D0 is called .v; /-overtaking optimal if for each ./-
program fyt g1 t D0 satisfying y0 D x0 the inequality
X
T 1
lim sup v.yt ; yt C1 / v.xt ; xt C1 / 0
T !1 t D0
holds.
The following result obtained in [28] establishes the existence of an overtaking
optimal program.
Theorem 4. Assume that x 2 X and that there exists a .v; /-good program
fxt g1
t D0 such that x0 D x. Then there exists an .v; /-overtaking optimal program
fxt g1
t D0 such that x0 D x.
The next result obtained in [28] provides necessary and sufficient conditions for
overtaking optimality.
Theorem 5. Assume that fxt g1 t D0 is an ./-program and that there exists a .v; /-
good program fyt g1t D0 such that y0 D x0 . Then the program fxt g1t D0 is .v; /-
overtaking optimal if and only if the following conditions hold:
(i) limt !1 .xt ; xN v / D 0;
(ii) For each natural number T and each ./-program fyt gTtD0 satisfying y0 D x0 ,
P 1 P 1
yT D xT the inequality tTD0 v.yt ; yt C1 / tTD0 v.xt ; xt C1 / holds.
The following two theorems obtained in [39] establish the uniform convergence
of overtaking optimal programs to xN v .
Theorem 6. Let L0 be a natural number and be a positive number. Then there
exists an integer T0 1 such that for each .v; /-overtaking optimal program
fxt g1 N
t D0 satisfying x0 2 YL0 the inequality .xt ; x
N v / holds for all integers t
T0 .
Theorem 7. Let > 0. Then there is > 0 such that for each .v; /-overtaking
optimal program fxt g1 N v / the inequality .xt ; xN v / holds
t D0 satisfying .x0 ; x
for all nonnegative integers t.
The following two lemmas play an important role in the proofs of the results
stated above. Their proofs can be found in [37].
Lemma 1 (Lemma 2.16 of [37]). Let ; M0 be positive numbers. Then there exists
an integer T0 1 such that for each natural number T T0 , each ./-program
fxt gTtD0 which satisfies
X
T 1
v.xt ; xt C1 / T v.xN v ; xN v / M0
t D0
and each integer s 2 0; T T0 the following inequality holds:
minf.xi ; xN v / W i D s C 1; : : : ; s C T0 g :
100 A.J. Zaslavski
Lemma 2 (Lemma 2.15 of [37]). Let be positive number. Then there exists a
number 2 .0; rNv / such that for each natural number T and each ./-program
fxt gTtD0 which satisfies
.x0 ; xN v /; .xT ; xN v / ;
X
T 1
v.xt ; xt C1 / .v; x0 ; xT ; T /
t D0
the inequality .xt ; xN v / holds for all integers t D 0; : : : ; T .

Lemma 1 shows that if a good program is defined on a sufficiently large interval,
then at some point it becomes close to the turnpike. Lemma 2 shows that if an
approximate optimal program is close to the turnpike at the endpoints, then it is
close to the turnpike at every point.
It is clear that .M ./; k k/ is a Banach space. Denote by M0 ./ the set of all
upper semicontinuous functions v 2 M ./ for which there exist xN v 2 X , cNv > 0
and rNv 2 .0; 1/ such that
f.x; y/ 2 X X W .x; xN v /; .y; xN v / rNv g ; (13)
v is continuous at .xN v ; xN v /; (14)
.v; T / T v.xN v ; xN v / C cNv for all integers T 1: (15)
In other words, M0 ./ is the set of all upper semicontinuous functions v 2

M ./ which satisfy assumptions (A1) and (A2) with some xN v 2 X , rNv 2 .0; 1/,
cNv > 0.
Denote by Mc;0 ./ the set of all continuous functions v 2 M0 ./. Denote
by MNc;0 ./ and MN0 ./ the closure of subspaces Mc;0 ./ and M0 ./ in M ./,
respectively.
We equip the sets MNc;0 ./ and MN0 ./ with the metric d induced by the norm
k k: d.u1 ; u2 / D ku1 u2 k, u1 ; u2 2 MN0 ./.
For each u 2 MN0 ./ and each r > 0 set
Bd .u; r/ D fw 2 MN0 ./ W ku wk < rg:
We associate with any v 2 M0 ./ the triplet .xN v ; cNv ; rNv / satisfying (13)(15).
Denote by M ./ the set of all v 2 M0 ./ such that for any .v; /-good
program fxi g1
i D0 ,
lim .xi ; xN v / D 0:
i !1
Set
Mc ./ D M ./ \ Mc ./:
The following theorem was established in [36].

Theorem 8. M ./ contains a set which is a countable intersection of open
everywhere dense subsets of MN0 ./ and Mc ./ contains a set which is a
countable intersection of open everywhere dense subsets of MNc;0 ./.
3 Preliminaries
We use the notation, definitions and assumptions introduced in Sect. 2. Let v 2

M ./ be an upper semicontinuous function. Suppose that xN v 2 X , rNv 2 .0; 1/,
cNv > 0 and that assumptions (A1)(A3) hold.
For each M > 0 denote by XM the set of all x 2 X for which there exists a
./-program fxt g1 t D0 such that x0 D x and that for all integers T 1 the following
inequality holds:
X
T 1
v.xt ; xt C1 / T v.xN v ; xN v / M:
t D0
Clearly, [fXM W M 2 .0; 1/g is the set of all points x 2 X such that there exists
a .v; /-good program fxt g1
t D0 satisfying x0 D x.
The boundedness of the function v implies the following useful auxiliary result.
Proposition 2. Let T 1 be an integer. Then there exists M > 0 such that YNT
XM .
Lemma 1 implies the following useful auxiliary result.
Proposition 3. Let M > 0. Then there exists a natural number T such that the
inclusion XM YNT holds.
We define a function v .x/, x 2 X which plays an important role in our study.
For all x 2 X n [fXM W M 2 .0; 1/g set
v .x/ D 1:
Let
x 2 [fXM W M 2 .0; 1/g: (16)

102 A.J. Zaslavski
Put
X
T 1
v .x/ D supflim sup .v.xt ; xt C1 / v.xN v ; xN v // W
T !1 t D0
ffxt g1
t D0 is an ./ program such that x0 D xg: (17)
By (A2), (16) and (17),
1 < v .x/ cNv : (18)
It follows from (16), (17) and Proposition 1 that
X
T 1
v .x/ D supflim sup .v.xt ; xt C1 / v.xN v ; xN v // W
T !1 t D0
fxt g1
t D0 is an .v; / good program such that x0 D xg: (19)
Denote by P.v; x/ the set of all .v; /-overtaking optimal programs fxt g1
t D0 such
that x0 D x. In view of Theorem 4, the set P.v; x/ is nonempty. Definition (17)
implies the following result.
Proposition 4. 1. Let fxt g1
t D0 be a .v; /-good program. Then for each integer
t 0,
v .xt / v.xt ; xt C1 / v.xN v ; xN v / C v .xt C1 /: (20)
2. Let T be a natural number and fxt gTtD0 be an ./-program such that v .xT / >
1. Then inequality (20) is valid for all integers t D 0; : : : ; T 1.
The next result follows from the definition of .v; /-overtaking optimal pro-
grams.
Proposition 5. Let x 2 [fXM W M 2 .0; 1/g and fxt g1
t D0 be a .v; /-overtaking
optimal program such that x0 D x. Then
X
T 1
v .x/ D lim sup .v.xt ; xt C1 / v.xN v ; xN v //:
T !1 t D0
Corollary 1. Let fxt g1t D0 be a .v; /-overtaking optimal and .v; /-good program.
Then for any integer t 0,
v .xt / D v.xt ; xt C1 / v.xN v ; xN v / C v .xt C1 /:

Put
sup. v / D supf v .z/ W z 2 [fXM W M 2 .0; 1/gg; (21)

Xv D fx 2 [fXM W M 2 .0; 1/g W .x/ sup. / 1g:
v v
(22)
The next result is proved in [39].

Proposition 6. v .xN v / D 0.
Theorem 7, Proposition 5 and (A1) imply the following result.
Proposition 7. The function v is finite in a neighborhood of xN v and continuous at
xN v .
The following results are proved in [39].
Proposition 8. Assume that x0 2 [fXM W M 2 .0; 1/g and fxt g1
t D0 2 P.v; x0 /.
Then
X
T 1
.x0 / D lim
v
.v.xt ; xt C1 / v.xN v ; xN v //:
T !1
t D0
Proposition 9. There exists a natural number Lv such that Xv YNLv .

Proposition 10. The function v W X ! R1 [ f1g is upper semicontinuous.
Set
D.v/ D fx 2 X W v .x/ D sup. v /g: (23)
Proposition 10 and (18) imply that the set D.v/ is nonempty and closed subset of
X . The following proposition is also proved in [39].
Proposition 11. Let fxt g1
t D0 be a .v; /-good program such that for all integers
t 0,
v.xt ; xt C1 / v.xN v ; xN v / D v .xt / v .xt C1 /:
Then fxt g1
t D0 is a .v; /-overtaking optimal program.
The next result easily follows from Proposition 9, Theorem 6, (22) and (23).
Proposition 12. For each > 0 there exists an integer T 1 such that for each
z 2 D.v/ and each ./-program fxt g1t D0 2 P.v; z/ the inequality .xt ; x
Nv /
holds for all integers t T .
In order to study the structure of solutions of the problems (P2) and (P3) we
introduce the following notation and definitions.
104 A.J. Zaslavski
Set
N D f.x; y/ 2 X X W .y; x/ 2 g:

(24)
N is a nonempty closed subset of X X and

It is clear that
N
f.x; y/ 2 X X W .x; xN v /; .y; xN v / rNv g : (25)
N is the set of all bounded functions u W

Then M ./ N ! R1 with
N
kuk D supfju.z/j W z 2 g:
N by
For each u 2 M ./ define uN 2 M ./
N
uN .x; y/ D u.y; x/; .x; y/ 2 : (26)
Clearly, u ! uN ; u 2 M ./ is a linear invertible isometry operator.

Let 0 T1 < T2 be integers and let fxt gTt DT 2
1
be an ./-program. Define
T2
fxN t gt DT1 X by
xN t D xT2 t CT1 ; t D T1 ; : : : ; T2 : (27)
Clearly, fxN t gTt DT

2 N
is an ./-program.
1
T2 1
Assume that fut gt DT1 M ./. It is easy to see that
2 1
TX 2 1
TX
uN T2 t CT1 1 .xN t ; xN t C1 / D uT2 t CT1 1 .xT2 t CT1 1 ; xT2 t CT1 /
t DT1 t DT1
2 1
TX
D ut .xt ; xt C1 /: (28)
t DT1
The next result easily follows from (28).

Proposition 13. Let T 1 be an integer, M 0,
1
fut gtTD0 M ./
.i /
and fxt gTtD0 , i D 1; 2 be ./-programs. Then
X
T 1 X
T 1
.1/ .1/ .2/ .2/
ut .xt ; xt C1 / ut .xt ; xt C1 / M
t D0 t D0
if and only if
X
T 1 X
T 1
.1/ .1/ .2/ .2/
uN T t 1 .xN t ; xN t C1 / uN T t 1 .xN t ; xN t C1 / M:
t D0 t D0
Proposition 13 implies the following result.

1
Proposition 14. Let T 1 be an integer, M 0, fut gtTD0 M ./ and fxt gTtD0
N
be an ./-program. Then fxN t gt D0 is an ./-program and the following assertions
T
hold:P
1 1
if tTD0 ut .xt ; xt C1 / .fut gtTD0 ; 0; T / M , then
X
T 1
1
uN T t 1 .xN t ; xN t C1 / .fNuT t 1 gtTD0 ; 0; T / M I
t D0
PT 1 1
if t D0 ut .xt ; xt C1 / .fut gtTD0 ; 0; T; x0 ; xT / M , then
X
T 1
1
uN T t 1 .xN t ; xN t C1 / .fNuT t 1 gtTD0 ; 0; T; xN 0 ; xN T / M I
t D0
PT 1 1
if t D0 ut .xt ; xt C1 / O .fut gtTD0 ; 0; T; xT / M , then
X
T 1
1
uN T t 1 .xN t ; xN t C1 / .fNuT t 1 gtTD0 ; 0; T; xN 0 / M I
t D0
PT 1 1
if t D0 ut .xt ; xt C1 / .fut gtTD0 ; 0; T; x0 / M , then
X
T 1
1
uN T t 1 .xN t ; xN t C1 / .fN
O uT t 1 gtTD0 ; 0; T; xN T / M:
t D0
The next result was obtained in [39].

Proposition 15. Let v 2 M ./ be an upper semicontinuous function. Suppose that
xN v 2 X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Then the function vN
is upper semicontinuous,
N
f.x; y/ 2 X X W .x; xN v /; .y; xN v / rNv g ; (29)
the function vN is continuous at .xN v ; xN v /,
.v; N xN v ; xN v / C cNv for all integers T 1

N T / T v. (30)
106 A.J. Zaslavski
N
N /-good
and for all .v; programs fxt g1
t D0 ,
lim .xt ; xN v / D 0:
t !1
In view of Proposition 15, if v 2 M ./ is upper semicontinuous and satisfies

(A1)(A3), then vN is also upper semicontinuous and satisfies (A1)(A3). Therefore
N
N /.
all the results presented above for the pair .v; / are also true for the pair .v;
4 Structure of Solutions of Lagrange Problems in the

Regions Close to the Endpoints
We use the notation, definitions and assumptions introduced in Sects. 2 and 3. The
results of this session were obtained in [39].
The following result describes the structure of approximate solutions of the
problems of the type (P2) in the regions close to the right endpoints.
Theorem 9. Suppose that v 2 M ./ is an upper semicontinuous function, xN v 2
X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Let L0 1, 0 1 be
integers and > 0. Then there exist > 0 and an integer T0 0 such that for each
1
integer T T0 , each fut gtTD0 M ./ satisfying
kut vk ; t D 0 : : : ; T 1
X
T 1
x0 2 YNL0 ; 1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T; x0 /
t D0
N
there exists an ./-program
fxt g1
t D0 2 [fP.v;
N z/ W z 2 D.v/g
N
such that
.xT t ; xt / ; t D 0; : : : ; 0 :
Recall that [fP.v; N z/ W z 2 D.v/gN is the set of all .v; N

N /-overtaking optimal
programs fxt gt D0 such that x0 is the point of maximum of the function vN .
1
The following result describes the structure of approximate solutions of the

problems of the type (P3) in the regions close to the endpoints.

X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Let 0 1 be an integer
and > 0. Then there exist > 0 and an integer T0 0 such that for each integer
1
T T0 , each fut gtTD0 M ./ satisfying
kut vk ; t D 0 : : : ; T 1
X
T 1
1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T /
t D0
there exist an ./-program
fyt g1
t D0 2 [fP.v; z/ W z 2 D.v/g
N
and an ./-program
fxt g1
t D0 2 [fP.v;
N z/ W z 2 D.v/g
N
such that for all integers t D 0; : : : ; 0 ;
.xT t ; xt / ; .xt ; yt / :
Proposition 16. Suppose that v 2 M ./ is an upper semicontinuous function,

xN v 2 X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Let 0 1 be an
integer and > 0. Then there exist > 0 and an integer T0 0 such that for each
u 2 Bd .v; r/ \ M ./ the following properties hold:
for each fxt g1
t D0 2 [fP.u; z/ W z 2 D.u/g there exists
fyt g1
t D0 2 [fP.v; z/ W z 2 D.v/g
such that .xt ; yt / for all integers t D 0; : : : ; 0 ;

for each fxt g1t D0 2 [fP.N u; z/ W z 2 D.Nu/g there exists
fyt g1
t D0 2 [fP.v;
N z/ W z 2 D.v/g
N
such that .xt ; yt / for all integers t D 0; : : : ; 0 .

We have already mentioned that the mapping v ! v, N v 2 M ./ is a linear
isometry which has the inverse. It is not difficult to see that
N for all v 2 M0 ./;

vN 2 M0 ./
N for all v 2 Mc;0 ./;
vN 2 Mc;0 ./
108 A.J. Zaslavski
N for all v 2 M ./;

vN 2 M ./
N for all v 2 Mc ./;
vN 2 Mc ./
vN 2 MN0 ./
N if and only if v 2 MN0 ./;
vN 2 MNc;0 ./
N if and only if v 2 MNc;0 ./:
The next theorem shows that for most objective functions v (in the sense of the
Baire category) the sets [fP.v; z/ W z 2 D.v/g and [fP.v; N z/ W z 2 D.v/g
N are
singletons. In this case approximate solutions of the problems of the types (P2) and
(P3) in the regions close to the endpoints have a simple structure.
Theorem 11. Let M be either MN0 ./ or MNc;0 ./. Then there exists a set F
M \ M ./ which is a countable intersection of open everywhere dense subsets of
M such that for each v 2 F there exists a unique pair of points z; zN 2 X such that
v .z/ D sup. v /; vN .Nz/ D sup. vN /
and there exist a unique .v; /-overtaking optimal program fzt g1 t D0 satisfying z0 D
z and a unique .v; N
N /-overtaking optimal program fbzt g1 satisfyingb z0 D zN.
t D0
5 The Turnpike Results for Discrete-Time Bolza Problems
We use the notation, definitions and assumptions introduced in Sects. 2 and 3.

For each nonempty set Y and each function h W Y ! R1 [ f1g put
sup.h/ D supfh.y/ W y 2 Y g:
Denote by M .X / the set of all bounded functions h W X ! R1 . For each h 2

M .X / set
khk D supfjh.x/j W x 2 X g:
Clearly, .M .X /; k k/ is a Banach space. For each h1 ; h2 2 M .X / set
dX .h1 ; h2 / D kh1 h2 k:
For each x 2 X , each pair of integers T1 ; T2 satisfying 0 T1 < T2 , each sequence

2 1
fut gTt DT 1
M ./ and each h 2 M .X / we consider the problem
2 1
TX
1
ut .xt ; xt C1 / C h.xT2 / ! max; f.xt ; xt C1 /gtTD0 ; xT1 D x (P4)
t DT1
and set
2 1
TX
2 1
.h; fut gtTDT 1
; T1 ; T2 ; x/ D supf ut .xt ; xt C1 / C h.xT2 / W
t DT1
fxt gTt DT
2
1
is an ./ program and xT1 D xg: (31)
For each x 2 X , each pair of integers T1 ; T2 satisfying 0 T1 < T2 , each u 2

M ./ and each h 2 M .X / set
2 1
.h; u; T1 ; T2 ; x/ D .h; fut gtTDT 1
; T1 ; T2 ; x/ where ut D u; t D T1 ; : : : ; T2 1:
(32)
In this section we study turnpike properties of approximate solutions of problems of
the type (P4) and establish the following three results.
Theorem 12. Let 2 .0; rNv / and M > 0. Then there exist a positive number
< minf1; M g and a natural number L such that for each integer T L, each
1
fut gTt D0 M ./, each h 2 M .X / and each ./-program fxt gTtD0 which satisfy
khk M; kut vk ; t D 0; : : : ; T 1; (33)

X
T 1
1
ut .xt ; xt C1 / C h.xT / .h; fut gtTD0 ; 0; T / M (34)
t D0
the inequality
Card.ft 2 f0; : : : ; T g W .xt ; xN v / > g/ < L (35)
holds.
Proof. By Assertion 1 of Theorem 3, there exist a positive number
< minf1; M g
and a natural number L such that the following property holds:

1
(i) For each integer T L, each fut gtTD0 M ./ and each ./-program fxt gTtD0
which satisfy
kut vk ; t D 0; : : : ; T 1;
X
T 1
1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T / 8M (36)
t D0
inequality (35) holds.

110 A.J. Zaslavski
1
Assume that an integer T L, fut gtTD0 M ./, h 2 M .X /, khk M ,
fxt gt D0 is an ./-program and (33) and (34) hold. In view of (33) and (34),
T
inequality (36) holds. By (33), (36) and property (i), the inequality (35) holds.
Theorem 12 is proved.
Theorem 13. Let a positive number < rNv , L0 1 be an integer and M0 > 0.
Then there exist an integer L 1 and a number 2 .0; / such that for each integer
1
kut vk ; t D 0 : : : ; T 1; (37)
each h 2 M .X / satisfying
khk M0 (38)
x0 2 YNL0 ; (39)
X
T 1
1
h.xT / C ut .xt ; xt C1 / .h; fut gtTD0 ; 0; T; x0 / M0 (40)
t D0
and
CL1
X
CL1
ut .xt ; xt C1 / .fut gtD ; ; C L; x ; x CL / (41)
t D

that
.xt ; xN v / ; t D 1 ; : : : ; 2 : (42)

Proof. By Theorem 2, there exist an integer L 1 and a number 2 .0; / such
that the following property holds:
1
(ii) For each integer T > 2L, each fut gtTD0 M ./ satisfying (37) and each
./-program fxt gt D0 which satisfies (39), the inequality
T
X
T 1
1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T; x0 / 4M0 (43)
t D0
and (41) for each integer 2 0; T L, there exist integers 1 2 0; L, 2 2
T L; T such that (42) holds; moreover if .x0 ; xN v / , then 1 D 0.
1
Assume that an integer T > 2L, fut gtTD0 M ./ satisfies (37), h 2 M .X /
satisfies (38) and that an ./-program fxt gTtD0 satisfies (39)(41) for each integer
2 0; T L. In view of (38) and (40), relation (43) holds. By (37), (39), (41),
(43) and property (ii), there exist integers 1 2 0; L and 2 2 T L; T such that
(42) holds and if .x0 ; xN v / , then 1 D 0. Theorem 13 is proved.
Theorem 13 implies the following turnpike result.
Theorem 14. Let a positive number < rNv , L0 1 be an integer and M0 > 0.
Then there exist an integer L 1 and a number 2 .0; / such that for each integer
1
kut vk ; t D 0 : : : ; T 1;
khk M0
x0 2 YNL0 ;
X
T 1
1
h.xT / C ut .xt ; xt C1 / .h; fut gtTD0 ; 0; T; x0 /
t D0
there exist integers 1 2 0; L, 2 2 T L; T such that
.xt ; xN v / ; t D 1 ; : : : ; 2 :
6 Structure of Solutions of Bolza Problems in the Regions

Close to the Endpoints
We use the notation, definitions and assumptions introduced in Sects. 2, 3 and 5.

In Sect. 8 we prove the following result which describes the structure of
approximate solutions of the problems of the type (P4) in the regions close to the
right endpoints.
Theorem 15. Suppose that g 2 M .X / and v 2 M ./ are upper semicontinuous
functions, xN v 2 X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Let
L0 1, 0 1 be integers and > 0, M0 > 1. Then there exist > 0 and an
integer T0 0 such that for each integer T T0 , each h 2 M .X / satisfying
kh gk ;
112 A.J. Zaslavski
1
each fut gtTD0 M ./ satisfying
kut vk ; t D 0 : : : ; T 1
x0 2 YNL0 ;
X
T 1
1
h.xT / C ut .xt ; xt C1 / .h; fut gtTD0 ; 0; T; x0 / M0 ;
t D0
CT
X 0 1
CT0 1
ut .xt ; xt C1 / .fut gt D ; ; C T0 ; x ; x CT0 /
t D
for each 2 f0; : : : ; T T0 g,
X
T 1
1
h.xT / C ut .xt ; xt C1 / .h; fut gtTDT T0 ; T T0 ; T; xT T0 /
t DT T0
N
N /-overtaking
there exists an .v; optimal program fxt g1
t D0 such that
. vN C g/.x0 / D sup. vN C g/;

.xT t ; xt / ; t D 0; : : : ; 0 :
Let g 2 M .X / and v 2 M ./ be as in the statement of Theorem 15 and satisfy

all the assumptions posed there. Then v C g W X ! R1 [ f1g is an upper
semicontinuous, bounded from above function such that . v C g/.xN v / D g.xN v / is
finite. Therefore there exists x 2 X such that
. v C g/.x/ D sup. v C g/:
Denote by Mu .X / the set of all upper semicontinuous functions belonging to the

space M .X / and denote by Mc .X / the set of all continuous functions belonging
to the space M .X /. Clearly, Mu .X / and Mc .X / are closed subsets of M .X /. We
consider the complete metric spaces Mu .X / and Mc .X / equipped with the metric
dX .
In order to state our next result we need the following notion of porosity [35].
Let .Y; d / be a complete metric space. We denote by BY .y; r/ the closed ball of
center y 2 Y and radius r > 0. A subset E Y is called porous (with respect to
d ) if there exist 2 .0; 1 and r0 > 0 such that for each r 2 .0; r0 and each y 2 Y
there exists z 2 Y for which
BY .z; r/ BY .y; r/ n E:
A subset of the space Y is called -porous (with respect to d ) if it is a countable

union of porous (with respect to d ) subsets of Y .
Since porous sets are nowhere dense, all -porous sets are of the first category.
If Y is a finite dimensional Euclidean space, then -porous sets are of Lebesgue
measure 0. In fact, the class of -porous sets in such a space is much smaller than
the class of sets which have measure 0 and are of the first category. To point out the
difference between porous and nowhere dense sets note that if E Y is nowhere
dense, y 2 Y and r > 0, then there is a point z 2 Y and a number s > 0 such that
BY .z; s/ BY .y; r/ n E. If, however, E is also porous, then for small enough r we
can choose s D r, where 2 .0; 1/ is a constant which depends only on E.
The discussion of the porosity notion and the corresponding references can be
found in [35]. Theorem 5.9 of [35] and Theorem 15 imply the following result.
X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Then there exists a set
F Mc ./ such that the set Mc ./ n F is -porous in Mc ./ and that for each
g 2 F the following assertions hold.
1. There exists a unique point xg 2 X such that
fx 2 X W . vN C g/.x/ D sup. vN C g/g D fxg g:
2. Let L0 1, 0 1 be integers and > 0, M0 > 1. Then there exist > 0 and
an integer T0 0 such that for each integer T T0 , each h 2 M .X / satisfying
kh gk ;
1
each fut gtTD0 M ./ satisfying
kut vk ; t D 0 : : : ; T 1
x0 2 YNL0 ;
X
T 1
1
h.xT / C ut .xt ; xt C1 / .h; fut gtTD0 ; 0; T; x0 / M0 ;
t D0
CT
X 0 1
CT0 1
ut .xt ; xt C1 / .fut gtD ; ; C T0 ; x ; x CT0 /
t D
for each 2 f0; : : : ; T T0 g,
X
T 1
1
h.xT / C ut .xt ; xt C1 / .h; fut gtTDT T0 ; T T0 ; T; xT T0 /
t DT T0
114 A.J. Zaslavski
N
N /-overtaking
there exists an .v; optimal program fxt g1
t D0 such that
x0 D xg ;
.xT t ; xt / ; t D 0; : : : ; 0 :
The next theorem which is proved in Sect. 10 shows that given a function
g 2 Mu .X /, for most objective functions v (in the sense of the Baire category) the
exists a unique pair of a .v; /-overtaking optimal program fzt g1 N
N /-
t D0 and a .v;
1
overtaking optimal program fb zt gt D0 such that
. v C g/.z0 / D sup. v C g/;

. vN C g/.b
z0 / D sup. vN C g/:
In this case approximate solutions of the problems of the types (P4) in the regions
close to the right endpoints have a simple structure.
Theorem 17. Let M be either MN0 ./ or MNc;0 ./ and let g 2 Mu .X /. Then there
exists a set F M \ M ./ which is a countable intersection of open everywhere
dense subsets of M such that for each v 2 F there exists a unique pair of points
z; zN 2 X such that
.g C v /.z/ D sup.g C v /; .g C vN /.Nz/ D sup.g C vN /
and there exist a unique .v; /-overtaking optimal program fzt g1 t D0 satisfying z0 D
z and a unique .v; N
N /-overtaking optimal program fbzt g1 satisfyingb z0 D zN.
t D0
Let v 2 M ./ and g 2 Mu .X /. Set
D.g; v/ D fz 2 X W .g C v /.z/ D sup.g C v /g
Q
and denote by P.g; v/ the set of all .v; /-overtaking optimal programs fzt g1
t D0
satisfying z0 2 D.g; v/.
In Sect. 9 we prove the following result.
Proposition 17. Suppose that g 2 Mu .X / and v 2 M ./ are upper semicontin-
uous functions, xN v 2 X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Let
0 1 be an integer and > 0. Then there exist > 0 and an integer T0 0 such
that for each u 2 Bd .v; r/ \ M ./ and each h 2 Mu .X / satisfying kh gk
the following properties hold:
for each fxt g1 Q 1 Q
t D0 2 P.h; u/ there exists fyt gt D0 2 P.g; v/ such that
.xt ; yt /
for all integers t D 0; : : : ; 0 ;

for each fxt g1 Q N / there exists fyt g1 Q

t D0 2 P.h; u t D0 2 P.g; v/
N such that
.xt ; yt /
for all integers t D 0; : : : ; 0 .

The next result is an extension of Theorem 17.
Theorem 18. Let M be either MN0 ./ or MNc;0 ./ and A be either Mu .X / or
Mc .X /. Then there exists a set F .M \ M .// A which is a countable
intersection of open everywhere dense subsets of M A such that for each
.v; g/ 2 F there exists a unique pair of programs fxt g1 Q
t D0 2 P.g; v/ and
1 Q
fxN t gt D0 2 P.g;
N v/.
Since the mapping v ! v,N v 2 M ./ is a linear isometry which has the inverse,
Theorem 18 follows from the next proposition which is proved in Sect. 11.
Proposition 18. Let M be either MN0 ./ or MNc;0 ./ and A be either Mu .X / or
Mc .X /. Then there exists a set F .M \ M .// A which is a countable
intersection of open everywhere dense subsets of M A such that for each .v; g/ 2
F there exists a unique program fxt g1 Q
t D0 2 P.g; v/.
7 A Basic Lemma for Theorem 15
Lemma 3. Suppose that g 2 M .X / and v 2 M ./ are upper semicontinuous

functions, xN v 2 X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Let T0 1
be an integer and 2 .0; 1/. Then there exists 2 .0; / such that for each ./-
program fxt gTt D0
0
which satisfies
. v C g/.x0 / sup. v C g/ ; (44)

0 1
TX
.v.xt ; xt C1 / v.xN v ; xN v // v .x0 / C v .xT0 / (45)
t D0
there exists an .v; /-overtaking optimal program fzt g1

t D0 such that
. v C g/.z0 / D sup. v C g/; (46)

.zt ; xt / ; t D 0; : : : ; T0 : (47)
Proof. Assume that the lemma does not hold. Then there exist a sequence of real
numbers fk g1
.k/ T0
kD1 .0; 1 and a sequence of ./-programs fxt gt D0 , k D 1; 2; : : :
such that
lim k D 0 (48)
k!1
116 A.J. Zaslavski
and that for each natural number k and each .v; /-overtaking optimal program
fzt g1
t D0 satisfying (46),
.k/
. v C g/.x0 / sup. v C g/ k ; (49)
0 1
TX
.k/ .k/ .k/ .k/
.v.xt ; xt C1 / v.xN v ; xN v // v .x0 / C v .xT0 / k ; (50)
t D0
.k/
maxf.zt ; xt / W t D 0; : : : ; T0 g > : (51)
.k/ .k/
By (49) and (50), for each natural numbers k, the values v .x0 / and v .xT0 /
are finite. Extracting a subsequence and re-indexing, if necessary, we may assume
without loss of generality that for each integer t 2 0; T0 there exists
.k/
xt D lim xt : (52)
k!1
By (52) and upper semicontinuity of g and v ,
.k/ .k/
v .x0 / lim sup v .x0 /; g.x0 / lim sup g.x0 /: (53)
k!1 k!1
It follows from Proposition 10, (49) and (53) that
.k/
sup. v C g/ . v C g/.x0 / lim sup. v C g/.x0 / sup. v C g/; (54)
k!1
.k/
sup. v C g/ D . v C g/.x0 / D lim . v C g/.x0 /: (55)
k!1
Relations (53) and (55) imply that
.k/ .k/
v .x0 / D lim v .x0 /; g.x0 / D lim g.x0 /: (56)
k!1 k!1
It follows from upper semicontinuity of v and v (see Proposition 10), (48), (50),
(52) and (56) that
0 1
TX
.v.xt ; xt C1 / v.xN v ; xN v // v .x0 / C v .xT0 /
t D0
0 1
TX
.k/ .k/ .k/ .k/
lim sup. .v.xt ; xt C1 / v.xN v ; xN v // v .x0 / C v .xT0 //
k!1 t D0
lim sup.k / D 0: (57)

k!1
Relations (55) and (57) imply that the values v .x0 / and v .xT0 / are finite.
Combined with Proposition 4 and (57) this implies that for all integers t D
0; : : : ; T0 1,
v.xt ; xt C1 / v.xN v ; xN v / D v .xt / v .xt C1 /: (58)
Since v .xT0 / is finite it follows from Theorem 4 that there exists a .v; /-
overtaking optimal and .v; /-good program fxQ t g1
t D0 satisfying
xQ 0 D xT0 : (59)
For all integers t > T0 set
xt D xQ t T0 : (60)
Evidently, fxt g1 t D0 is an ./-program. Since fx Q t g1

t D0 is .v; /-overtaking optimal
and .v; /-good program it follows from Corollary 1 and (60) that (58) holds for
all integers t 0. Since fxQ t g1 t D0 is .v; /-good program relations (58), (59) and
Proposition 11 imply that fxt g1 t D0 is .v; /-overtaking optimal program satisfying
.k/
(55). By (52), for all sufficiently large natural numbers k, .xt ; xt / =4, t D
0; : : : ; T0 . This contradicts (46) and (51). The contradiction we have reached proves
Lemma 3.
We may assume that rNv 2 .0; 1/. Recall that
f.x; y/ 2 X X W .x; xN v /; .y; xN v / rNv g : (61)
By Lemma 3 applied to the function vN there exists a real number
1 2 .0; minf; rNv =2g/
such that the following property holds:

(Pi) N
For each ./-program fyt gt D0
0
which satisfies
. vN C g/.y0 / sup. vN C g/ 1 ; (62)

0 1
X
.v.y N xN v ; xN v // vN .y0 / C vN .y0 / 1
N t ; yt C1 / v. (63)
t D0
118 A.J. Zaslavski
N
N /-overtaking
there exists an .v; optimal program fzt g1
t D0 such that
. vN C g/.z0 / D sup. vN C g/; (64)

.zt ; yt / ; t D 0; : : : ; 0 : (65)
Propositions 6 and 7 and assumption (A1) imply that there exists a real number
2 2 .0; 1 / such that for each point z 2 X satisfying .z; xN v / 22 ,
j vN .z/j D j vN .z/ vN .xN v /j 1 =8 (66)
and for each .x; y/ 2 X X satisfying .x; xN v / 22 , .y; xN v / 22 ,
jv.x; y/ v.
N xN v ; xN v /j 1 =8: (67)
It follows from Theorem 13 that there exist a natural number L and a positive
number 3 such that the following property holds:
1
(Pii) For each integer T > 2L, each fut gtTD0 M ./ satisfying
kut vk 3 ; t D 0 : : : ; T 1;
kh gk 1
and each ./-program fzt gTtD0 which satisfies
z0 2 YNL0 ;
X
T 1
1
h.zT / C ut .zt ; zt C1 / .h; fut gtTD0 ; 0; T; z0 / M0 ;
t D0
CL1
X
CL1
ut .zt ; zt C1 / .fut gtD ; ; C L; z ; z CL / 3
t D
for each integer 2 0; T L, we have .zt ; xN v / 2 ; t D L; : : : ; T L:

Set
D0 D fz 2 X W . vN C g/.z/ D sup. vN C g/g: (68)
Proposition 6, (18) and (25) imply that the set D0 is nonempty and closed.
Let
z 2 D0 : (69)
By (68) and (69),
vN .z/ sup. vN C g/ kgk: (70)
It follows from (70) and Theorem 4 that there exists a .v; N

N /-overtaking optimal
N 1
N /-good program fzt gt D0 such that
and .v;
z0 D z 2 D0 : (71)
N
N /-overtaking
By Proposition 8, for each .v; optimal program f
t g1
t D0 such that
0 2 D0 we have
X
T 1
vN .
0 / D lim N t ;
t C1 / v.
.v.
N xN v ; xN v //: (72)
T !1
t D0
Lemma 1, (70) and (72) imply that there exists a natural number L1 such that
D0 YL1 : (73)
By (73) and Theorem 6 applied to the function vN there exists a natural number 1
N
N /-overtaking optimal program fzt g1
such that for each .v; t D0 satisfying z0 2 D0 we
have
.zt ; xN v / 2 for all integers t 1 : (74)
Choose a number > 0 and a natural number T0 such that
< .16.L C 1 C 0 C 8//1 minf1 ; 2 ; 3 g; (75)

T0 > 2L C 20 C 21 C 4: (76)
Assume that an integer T T0 , h 2 M .X / satisfies
kh gk ; (77)
1
fut gTt D0 M ./ satisfies
kut vk ; t D 0 : : : ; T 1 (78)
and fxt gTtD0 is an ./-program which satisfies
x0 2 YNL0 ; (79)
X
T 1
1
h.xT / C ut .xt ; xt C1 / .h; fut gtTD0 ; 0; T; x0 / M0 ; (80)
t D0
120 A.J. Zaslavski
CT
X 0 1
CT0 1
ut .xt ; xt C1 / .fut gtD ; ; C T0 ; x ; x CT0 / (81)
t D
for each integer 2 0; T T0 ,
X
T 1
1
h.xT / C ut .xt ; xt C1 / .h; fut gtTDT T0 ; T T0 ; T; xT T0 / : (82)
t DT T0
It follows from (75) to (79), (81) and the property (Pii) that
.xt ; xN v / 2 ; t D L; : : : ; T L: (83)
By (76),
T L 0 1 4; T L 0 1 L; T L 0 1 : (84)
In view of (83) and (84),
.xt ; xN v / 2 ; t 2 fT L 0 1 4; T L 0 1 g: (85)
N
N /-overtaking
There exists (see (68)(71)) an .v; optimal program fzt g1
t D0 such that
z0 2 D0 ; . vN C g/.z0 / D sup. vN C g/: (86)
Then (74) holds.

Define a sequence fxQ t gTtD0 by
xQ t D xt ; t D 0; : : : ; T L 0 1 4;
xQ t D zT t ; t D T L 0 1 3; : : : ; T: (87)
Relations (74) and (87) imply that
.xQ T L0 1 3 ; xN v / D .zLC0 C1 C3 ; xN v / 2 : (88)
It follows from (61), (85), (87) and (88) that fxQ t gTtD0 is an ./-program. By (76)
(78), (82) and (87),
X
T 1
1
.h; fut gtTDT T0 ; T T0 ; T; xT T0 / h.xT / ut .xt ; xt C1 /
t DT T0
X
T 1 X
T 1
h.xQ T / C ut .xQ t ; xQ t C1 / h.xT / ut .xt ; xt C1 /
t DT T0 t DT T0
X
T 1
D h.xQ T / h.xT / C .ut .xQ t ; xQ t C1 / ut .xt ; xt C1 //
t DT L0 1 4
X
T 1
g.xQ T / g.xT / C v.xQ t ; xQ t C1 /
t DT L0 1 4
X
T 1
v.xt ; xt C1 / 2.L C 0 C 1 C 6/:
t DT L0 1 4
Combined with (85) this implies that
X
T 1
g.xT / C v.xt ; xt C1 /
t DT L0 1 4
X
T 1
g.xQ T / C v.xQ t ; xQ t C1 / 2.L C 0 C 1 C 8/
t DT L0 1 4
D g.z0 / C v.xT L0 1 4 ; zLC0 C1 C3 /

0 C1 C2
LCX
C N t ; zt C1 / 2.L C 0 C 1 C 8/:
v.z (89)
t D0
In view of (67), (74) and (85),
jv.z
N LC0 C1 C3 ; xT L0 1 4 / v.z
N LC0 C1 C3 ; zLC0 C1 C4 /j 1 =4:
Combined with (89) this implies that
X
T 1
g.xT / C v.xt ; xt C1 /
t DT L0 1 4
0 C1 C3
LCX
g.z0 / C N t ; zt C1 / 1 =4 2.L C 0 C 1 C 8/:
v.z (90)
t D0
Set
yt D xT t ; t D 0; : : : ; L C 0 C 1 C 4: (91)
By (75), (90) and (91),
0 C1 C3
LCX
g.y0 / C N t ; yt C1 /
v.y
t D0
122 A.J. Zaslavski
0 C1 C3
LCX
D g.xT / C v.xT t 1 ; xT t /
t D0
X
T 1
D g.xT / C v.xt ; xt C1 /
t DT L0 1 4
0 C1 C3
LCX
g.z0 / C N t ; zt C1 / 31 =8:
v.z (92)
t D0
By (86), (92), Proposition 4 and Corollary 1 and .v; N

N /-overtaking optimality of
1
fzt gt D0 ;
. vN C g/.y0 / sup. vN C g/
0 1
X
C N xN v ; xN v // vN .y0 / C vN .y0 /
N t ; yt C1 / v.
.v.y
t D0
. vN C g/.y0 / . vN C g/.z0 /
0 C1 C3
LCX
C N xN v ; xN v // vN .y0 / C vN .yLC0 C1 C4 /
N t ; yt C1 / v.
.v.y
t D0
0 C1 C3
LCX
vN vN
.y0 / .z0 / C N t ; zt C1 / v.
.v.z N xN v ; xN v //
t D0
vN .y0 / C vN .yLC0 C1 C4 / 31 =8

D vN .zLC0 C1 C4 / vN .yLC0 C1 C4 / 31 =8: (93)
In view of (66) and (74),
vN .zLC0 C1 C4 / 1 =8: (94)
By (66), (85) and (91),
j vN .yLC0 C1 C4 /j D j vN .xT L0 1 4 /j 1 =8:
Combined with (93) and (94) this implies that
. vN C g/.y0 / sup. vN C g/
0 1
X
C N xN v ; xN v // vN .y0 / C vN .y0 / 1 :
N t ; yt C1 / v.
.v.y
t D0
Together with (83) and Proposition 4 this implies that
. vN C g/.y0 / sup. vN C g/ 1 ; (95)

0 1
X
.v.y N xN v ; xN v // vN .y0 / C vN .y0 / 1 :
N t ; yt C1 / v. (96)
t D0
N
N /-overtaking
It follows from (95), (96) and the property (Pi) that there exists an .v;
1
optimal program f
t gt D0 such that
. vN C g/.
0 / D sup. vN C g/;
.
t ; xT t / D .
t ; yt / ; t D 0; : : : ; 0 : Theorem 15 is proved. t
u
9 Proof of Proposition 17
Since the mapping v ! v, N v 2 M ./ is an isometry Proposition 17 follows from

Proposition 15 and the following result.
Proposition 19. Suppose that g 2 Mu .X / and v 2 M ./ is an upper semicon-
tinuous function, xN v 2 X , rNv > 0, cNv > 0 and that assumptions (A1)(A3) hold. Let
0 1 be an integer and > 0. Then there exist > 0 and an integer T0 0 such
that for each u 2 Bd .v; / \ M ./ and each h 2 Mu .X / satisfying kh gk
the following property holds:
for each fxt g1 Q N / there is fyt g1 Q
t D0 2 P.h; u t D0 2 P.g; v/
N such that .xt ; yt /
for all integers t D 0; : : : ; 0 .
Proof. By (A2), for each u 2 M0 ./ and each integer T 1,
.u; T; xN u ; xN u / D T u.xN u ; xN u /; (97)

u.xN u ; xN u / u.z; z/ for all z 2 X such that .z; z/ 2 : (98)
We show that together with (98) and Assertion 1 of Theorem 3 this implies that
there exists 0 2 .0; / such that for each u 2 Bd .v; 0 / \ M0 ./,
.xN u ; xN v / rNv =4: (99)
By Assertion 1 of Theorem 3, there exist a positive number Q < 1 and a natural

number LQ such that the following property holds:
Q each fut gT 1 M ./ and each ./-program fxt gT
(i) For each integer T L, t D0 t D0
which satisfy
Q t D 0; : : : ; T 1;
kut vk ;
124 A.J. Zaslavski
X
T 1
1
ut .xt ; xt C1 / .fut gtTD0 ; 0; T / 2cNv 4
t D0
we have
Q
Card.ft 2 f0; : : : ; T g W .xt ; xN v / > 81 rNv g/ < L:
Choose a positive number 0 such that
Q 0 < ; 0 < .2L/

0 < ; Q 1 : (100)
Assume that
u 2 Bd .v; 0 / \ M0 ./: (101)
In view of (101), relation (98) holds. Set

t D xN u ; t D 0; 1; : : : : (102)
We show that (99) holds. Assume the contrary. Then
.
t ; xN v / > rNv =4; t D 0; 1; : : : : (103)
By (100), (101), (103) and property (i), for each integer k 0,
Q
X
.kC1/L1
Q 2cNv 4:
u.
t ;
t C1 / < .u; 0; L/ (104)
Q
t Dk L
It follows from (100), (101) and (A2) that
.u; 0; L/ Q C 0 LQ Lv.
Q .v; 0; L/ Q xN v ; xN v / C cNv C 0 LQ
Q xN v ; xN v / C cNv C 20 LQ Lu.
Lu. Q xN v ; xN v / C cNv C 1: (105)
Relations (104) and (105) imply that for each integer k 0,
Q
X
.kC1/L1
Q xN v ; xN v / cNv 3:
u.
t ;
t C1 / Lu.
Q
t Dk L
Together with (102) this implies that
Q xN u ; xN u / Lu.
Lu. Q xN v ; xN v / cNv 3;
u.xN u ; xN u / < u.xN v ; xN v /:
This contradicts (98). The contradiction we have reached proves (99). Thus we have
shown that for each function u satisfying (101) relation (99) is valid.
By Theorem 15, there exist 2 .0; 0 / and a natural number T0 0 such that
the following property holds:
(ii) For each integer T T0 , each h 2 M .X / satisfying kh gk , each
fut g0T 1 M0 ./ satisfying
kut vk ; t D 0; : : : ; T 1
and each ./-program fzt gTtD0 which satisfies
.z0 ; xN v / rNv =2;

X
T 1
1
h.zT / C ut .zt ; zt C1 / .h; fut gtTD0 ; 0; T; z0 /
t D0
there exists fxt g1 Q

t D0 2 P.g; v/
N such that
.zT t ; xt / ; t D 0; : : : ; 0 :
Assume that
u 2 M ./; ku vk ; h 2 Mu .X /; kh gk ; (106)
fxt g1 Q
t D0 2 P.h; u
N /: (107)
In view of (106), (107) and (A3),
lim xt D xN u : (108)
t !1
It follows from (100), (106) and the choice of 0 that (99) holds. By (108), there
exists an integer S0 > T0 such that
.xS0 ; xN u / rNv =4:
Together with (99) this implies that
.xS0 ; xN v / rNv =2: (109)
Set
zt D xS0 t ; t D 0; : : : ; S0 : (110)
126 A.J. Zaslavski
By (109) and (110),
.z0 ; xN v / rNv =2: (111)
It is clear that fzt gSt D0

0
is an ./-program. We show that
0 1
SX
h.zS0 / C u.zt ; zt C1 / D .h; u; S0 ; z0 /: (112)
t D0
Let fyt gSt D0

0
be an ./-program satisfying
y0 D z0 : (113)
In order to prove (112) it is sufficient to show that
0 1
SX 0 1
SX
h.zS0 / C u.zt ; zt C1 / h.yS0 / C u.yt ; yt C1 /:
t D0 t D0
It follows from (110) that
0 1
SX 0 1
SX
h.zS0 / C u.zt ; zt C1 / D h.x0 / C uN .xS0 t 1 ; xS0 t /: (114)
t D0 t D0
Set
yNt D yS0 t ; t D 0; : : : ; S0 : (115)
In view of (115),
0 1
SX 0 1
SX
h.yS0 / C u.yt ; yt C1 / D h.yN0 / C uN .yNt ; yNt C1 /: (116)
t D0 t D0
N
In view of (107), (109), (110), (113)(116), Proposition 4, Corollary 1 and .Nu; /-
overtaking optimality of fxt g1
t D0 (see (107)),
0 1
SX 0 1
SX
h.zS0 / C u.zt ; zt C1 / h.yS0 / C u.yt ; yt C1 /
t D0 t D0
0 1
SX 0 1
SX
D h.x0 / C uN .xt ; xt C1 / h.yN0 / C uN .yNt ; yNt C1 /
t D0 t D0
0 1
SX
D h.x0 / C Nu.xt ; xt C1 / u.xN u ; xN u / uN .xt / C uN .xt C1 /
t D0
C uN .x0 / uN .xS0 /
0 1
SX
.h.yN0 / C Nu.yNt ; yNt C1 / u.xN u ; xN u / uN .yNt / C uN .yNt C1 /
t D0
C uN .yN0 / uN .yNS0 //
D h.x0 / C uN .x0 / h.yN0 / uN .yN0 /
0 1
SX
Nu.yNt ; yNt C1 / u.xN u ; xN u / uN .yNt / C uN .yNt C1 /
t D0
h.x0 / C uN .x0 / h.yN0 / uN .yN0 / 0:
Thus (112) holds. By (106), (111), (112), the inequality S0 > T0 and the property (ii)
applied to fzt gSt D0 there exists an fxt g1 Q
t D0 2 P.g; v/
N such that for all t D 0; : : : ; 0 ,
0
.zS0 t ; xt / D .xt ; xt /:
Proposition 19 is proved.
In the sequel we use the following auxiliary results.

Proposition 20 (Proposition 12.1 of [39]). Let v 2 M ./, fxt g1 t D0 be a .v; /-
overtaking optimal and .v; /-good program and t2 > t1 be nonnegative integers
such that xt1 D xt2 . Then xt D xN v for all integers t D t1 ; : : : ; t2 .
Proposition 21 (Proposition 12.2 of [39]). Let v 2 M ./, fxt g1 t D0 be a .v; /-
overtaking optimal program such that x0 D xN v . Then xt D xN v for all integers t 0.
For any .x; y/ 2 X X and any nonempty set D X X put
..x; y/; D/ D inff.x; z1 / C .y; z2 / W .z1 ; z2 / 2 Dg:
Since the mapping v ! v, N v 2 M ./ is an isometry Theorem 17 follows from

Propositions 14, 15 and the following result.
Proposition 22. Let M be either MN0 ./ or MNc;0 ./ and g 2 Mu .X /. Then there
exists a set F M \ M ./ which is a countable intersection of open everywhere
dense subsets of M such that for each v 2 F there exists a unique point zv 2 X
128 A.J. Zaslavski
such that
. v C g/.zv / D sup. v C g/
and there exist a unique .v; /-overtaking optimal program fzvt g1

t D0 satisfying z0 D
v
zv .
Let M be either MN0 ./ or MNc;0 ./. By Theorem 8, there exists a set F0
M \ M ./ which is a countable intersection of open everywhere dense subsets of
M.
For each g 2 Mu .X / denote by Eg the set of all v 2 M \ M ./ for which the
following property holds:
(Pi) There exists a unique point zv 2 X such that
. v C g/.zv / D sup. v C g/
and there exists a unique .v; /-overtaking optimal program fzvt g1

t D0 satisfying
zv0 D zv .
We proceed the proof of Proposition 22 with the following auxiliary result.
Lemma 4. For each g 2 Mu .X /, Eg is a an everywhere dense subset of M.
Proof. Let v 2 M \ M ./. It is sufficient to show that for any neighborhood U
of v in M, U \ Eg 6D ;. There are two cases:
. v C g/.xN v / D sup. v C g/I (117)

. C g/.xN v / < sup. C g/:
v v
(118)
Assume that (117) holds. Let 2 .0; 1/. Define
v .x; y/ D v.x; y/ ..x; xN v / C .y; xN v //; .x; y/ 2 : (119)
It is easy to see that
v 2 M \ M0 ./ with xN v D xN v : (120)
In view of (119), every .v ; /-good program fxt g1

t D0 is .v; /-good and
lim xt D xN v :
t !1
Hence
v 2 M ./: (121)
Proposition 6 and (119)(121) imply that
v .xN v ; xN v / D v.xN v ; xN v /; v .y/ v .y/; y 2 X; v .xN v / D v .xN v / D 0;

. v C g/.y/ . v C g/.y/; y 2 X; . v C g/.xN v / D . v C g/.xN v /: (122)
Assume that a point z 2 X satisfies
. v C g/.z/ D sup. v C g/ (123)
and that fzt g1

t D0 is an .v ; /-overtaking optimal program such that
z0 D z: (124)
In view of (117), (119)(124) and Proposition 8,
sup. v C g/ g.z/ D sup. v C g/ g.z/

X
T 1
D v .z/ D lim v .zt ; zt C1 / v .xN v ; xN v /
T !1
t D0
X
T 1 X
T 1
D lim v.zt ; zt C1 / T v.xN v ; xN v / ..zt ; xN v / C .zt C1 ; xN v //
T !1
t D0 t D0
X
T 1 1
X
lim sup .v.zt ; zt C1 / v.xN v ; xN v // ..zt ; xN v / C .zt C1 ; xN v //
T !1 t D0 t D0
1
X
v .z/ ..zt ; xN v / C .zt C1 ; xN v //
t D0
1
X
D ..zt ; xN v / C .zt C1 ; xN v // C . v C g/.z/ g.z/:
t D0
This implies that zt D xN v for all integers t 0 and v 2 Eg .

Assume that (118) holds. There exist a point z 2 X which satisfies
. v C g/.z / D sup. v C g/ (125)
and an .v; /-overtaking optimal program fzt g1

t D0 satisfying
z0 D z :
By Proposition 8 and (125),

130 A.J. Zaslavski
X
T 1
v .z / D lim v.zt ; zt C1 / v.xN v ; xN v /: (126)
T !1
t D0
Assumption (A3) imply that
lim z D xN v : (127)
t !1 t
By (118), (125), (127) and Proposition 10,
. v C g/.zt / < . v C g/.z0 / for all large enough integers t 1: (128)
In view of (128), there exists an integer 0 0 such that
. v C g/.z0 / D . v C g/.z /
and that
. v C g/.zt / < . v C g/.z /
for all integers t > 0 . We may assume without loss of generality 0 D 0. Thus
. v C g/.z0 / D sup. v C g/; . v C g/.zt / < . v C g/.z0 / for all integers t 1:

(129)
Let 2 .0; 1/. For all .x; y/ 2 define
v .x; y/ D v.x; y/ ..x; y/; .f.zt ; zt C1 / W t D 0; 1; : : : g [ f.xN v ; xN v /g//:

(130)
By (130),
v 2 M \ M0 ./; v .xN v ; xN v / D v.xN v ; xN v /;
every .v ; /-good program is .v; /-good and converges to xN v . Hence
v 2 M ./; xN v D xN v : (131)
It follows from (125), (126), (130), (131) and the equality z0 D z that
v .y/ v .y/; y 2 X; v .z / D v .z /;

sup. v C g/ D sup. v C g/: (132)
By (131), for all natural numbers T ,
.v ; T; xN v ; xN v / D T v.xN v ; xN v /: (133)

Proposition 6 and (131) imply that
v .xN v / D 0: (134)
Set
K D f.zt ; zt C1 / W t D 0; 1; : : : g [ f.xN v ; xN v /g: (135)
Assume that y 2 X satisfies
. v C g/.y/ D sup. v C g/ (136)
and that fyt g1

t D0 is an .v ; /-overtaking optimal program satisfying
y0 D y: (137)
By (125), (130)(132), (135)(137), Proposition 8 and since the program fyt g1

t D0 is
.v ; /-overtaking optimal we have
sup. v C g/ D . v C g/.z / D . v C g/.z / D . v C g/.y/

X
T 1
D lim v .yt ; yt C1 / v .xN v ; xN v / C g.y/
T !1
t D0
X
T 1
D lim .v.yt ; yt C1 / v.xN v ; xN v / ..yt ; yt C1 /; K// C g.y/
T !1
t D0
1
X
v .y/ ..yt ; yt C1 /; K/ C g.y/:
t D0
Together with (118) and (133) this implies that
. v C g/.y/ D . v C g/.z /; (138)

.yt ; yt C1 / 2 K for all integers t 0: (139)
In view of (118), (125), (129), (135), (137)(139) and the equality z0 D z ,
y D y0 D z : (140)
We show by induction that yt D zt for all integers t 0. There are two cases:
zt 6D xN v for all integers t 0I (141)

xN v 2 fzt W t D 0; 1; : : : g: (142)
132 A.J. Zaslavski
Assume that (141) holds. By Proposition 20, (125)(126) and (141),
zt1 6D zt2 for all integers t2 > t1 0: (143)
Assume that T 0 is an integer and that
yt D zt ; t D 0; : : : ; T: (144)
(Note that in view of (140) and the equality z0 D z our assumption holds for
T D 0.) By (135), (139), (141), (143) and (144),
.zT ; yT C1 / D .yT ; yT C1 / 2 K D f.zt ; zt C1 / W t D 0; 1; : : : g [ f.xN v ; xN v /g
and yT C1 D zT C1 . Thus yt D zt for all integers t 0.

Assume that (142) holds. By (118), (125) and the equality z0 D z , there is a
natural number S such that
zS D xN v ; zt 6D xN v for all integers t 2 0; S /: (145)
Propositions 20 and 21 imply that,
zt D xN v for all integers t S; (146)

zt2 6D zt1 for all integers t1 ; t2 2 0; S such that t1 < t2 : (147)
Assume that T 0 is an integer and that
yt D zt ; t D 0; : : : ; T: (148)
(Note that in view of (140), our assumption holds for T D 0.) If T < S , then by
(135), (139), (145) and (148),
.zT ; yT C1 / D .yT ; yT C1 / 2 f.zt ; zt C1 / W t D 0; 1; : : : g [ f.xN v ; xN v /g
and yT C1 D zT C1 . If T S , then by (135), (139), (145), (146) and (148),
.xN v ; yT C1 / D .yT ; yT C1 / 2 f.zt ; zt C1 / W t D 0; 1; : : : g [ f.xN v ; xN v /g
and yT C1 D xN v D zT C1 . Thus yt D zt for all integers t 0 in the both cases (see
(141) and (142)). This implies that v 2 Eg . Therefore the inclusion above holds in
the both cases (see (117) and (118)). Since v ! v as ! 0C in M we conclude
that for any neighborhood U of v in M, U \ Eg 6D ;: Thus Eg is an everywhere
dense subset of M. Lemma 4 is proved.
Completion of the proof of Proposition 22 By definition, for every v 2 Eg , there

exist a unique .v; /-overtaking optimal program fzvt g1
t D0 satisfying
. v C g/.zv0 / D sup. v C g/:
Let v 2 Eg and k 1 be an integer. By Proposition 17, there exist an open

neighborhood U .v; k/ of v in M and an integer T .v; k/ k such that the following
property holds:
(Pii) For each u 2 U .v; k/ \ M ./ and each fxt g1 Q
t D0 2 P.g; u/ we have
.xt ; zvt / k 1 , t D 0; : : : ; k.
Set
F1 D \1
pD1 [ fU .v; k/ W v 2 Eg ; k pg; F D F1 \ F0 : (149)
Clearly, F is a countable intersection of open everywhere dense subsets of M and

F F0 M ./.
Let u 2 F , p 1 be an integer and fxt g1
.i /
t D0 , i D 1; 2 be .u; /-overtaking
optimal programs such that
.i /
. v C g/.x0 / D sup. v C g/; i D 1; 2: (150)
By (149), there exist vp 2 Eg and an integer kp p such that
u 2 U .vp ; kp /: (151)
v
In view of (149), (151) and property (Pii), .xt ; zt p / kp1 p 1 , t D 0; : : : ; p,
.i /
i D 1; 2. This implies that .xt ; xt / 2p 1 , t D 0; : : : ; p. Since p is any

.1/ .2/
.1/ .2/
natural number we conclude that xt D xt for all integers t 0: Proposition 22
is proved. t
u
11 Proof of Proposition 18
By Theorem 8, there exists a set G0 M\M ./ which is a countable intersection

of open everywhere dense subsets of M.
Denote by E the set of all .v; g/ 2 .M \ M .// A for which there exists a
unique program fzt g1
.v;g/ Q
t D0 2 P.g; v/.
By Lemma 4, E is a an everywhere dense subset of M A.
Let .v; g/ 2 E and k 1 be an integer. By Proposition 17, there exist an open
neighborhood U .v; g; k/ of .v; g/ in M A and an integer T .v; g; k/ k such
that the following property holds:
(i) For each .u; h/ 2 U .v; g; k/ \ .M ./ A/ and each fxt g1 Q
t D0 2 P.h; u/ we
.v;g/ 1
have .xt ; zt / k , t D 0; : : : ; k.
134 A.J. Zaslavski
Set
F D \1
pD1 [ fU .v; g; k/ W .v; g/ 2 E; k pg \ .G0 A/: (152)
Clearly, F is a countable intersection of open everywhere dense subsets of M A.

Let .u; h/ 2 F , p 1 be an integer and
fxt g1
.i / Q
t D0 2 P.h; u/; i D 1; 2: (153)
By (152), there exist .vp ; gp / 2 E and an integer kp p such that
.u; h/ 2 U .vp ; gp ; kp /: (154)
.gp ;vp /
/ kp1 p 1 , t D 0; : : : ; p, i D 1; 2. This
.i /
In view of (152)(154), .xt ; zt
implies that .xt ; xt / 2p 1 , t D 0; : : : ; p. Since p is any natural number we
.1/ .2/
.1/ .2/
conclude that xt D xt for all integers t 0: Proposition 18 is proved. t
u
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Index
A Expectation of the level sets, 11, 12

Asymptotic turnpike property, 93 Expected value (or expectation), 26
Aumann-Gelfand integral, X over set A, 4
Aumann integral, 9, 10
F
F-measurable, 3
B
Fuzzy conditional expectation, 18, 19, 26
Baire category, 93
Fuzzy convex upper semicontinuous variable,
Banach space, 100
8
Bermudan derivatives, 58, 59
Fuzzy expectation, 18, 19
Bolza problem, 92
Fuzzy martingale, 26
Fuzzy set valued random variables, 2
C Fuzzy submartingale, 26
Cardinality, 96 Fuzzy supermartingale, 26
cc (E), 3
ck (E), 3
Closed convergence topology, 34, 35, 39, 41, G
45 Gelfandintegrable selections, 4
Compact metric space, 92 (/-Good program, 93
Conditional expectation, level sets, 11, 12, 13,
14, 19
cwk (E), 3 H
Hrmander type diffusion process, 61, 7881
D
Demand function, 3437, 41, 4345
Discrete-time optimal control system, 92 I
Infinite horizon optimal control problem, 93
Infinite interval, 92
E Integrability theory, 3, 34
Estimate error, 34, 35, 41, 45 Integrably bounded mappings, 4
Expectation of random fuzzy convex Integrand martingales, 27
integrands, 18 Inverse demand function, 35, 36, 38, 41, 45, 52

Advances in Mathematical Economics, DOI 10.1007/978-4-431-55489-9
138 Index
K R
K -valued random set, 5 Random fuzzy convex upper semicontinuous
integrands, level sets, 9, 12
Random fuzzy convex upper semicontinuous
L variable, level sets, 89
Lagrange problem, 92 Random lower semicontinuous integrands, 8
Least square regression methods, 58 Random systems of piece-wise polynomials,
Local C 1 topology, 35, 4143, 45 60
Local uniform topology, 41, 45 Random upper semicontinuous integrands, 8
Lower semicontinuous integrand martingale, Re-simulation, 7173
27 Revealed preference theory, 34
M
Martingales, 27 S
Monte Carlo methods, 58 Scalarly F-measurable mapping, 3, 4
Scalarly integrable, 4
Sequential weak lower limit w -liXn , 6
N Sequential weak upper limit w -lsXn , 6
Normal integrand, 4 Support function, 3
O T
Optimal control problem, 92 Turnpike phenomenon, 93
Overtaking optimal program, 98, 99
P W
Perturbation, 98 Weak axiom of revealed preference, 34
Preference relation, 34, 35, 38, 42, 43, 45 Weakly compactly generated (WCG), 6
(/-Program, 92 Weak star (w K for short) converges, 6
p-transitive, 34, 36, 38, 42, 43 w -topology, 3

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Advances in Mathematical Economics 19

Shigeo Kusuoka Toru Maruyama

Robert Anderson Jean-Michel Grandmont Kunio Kawamata

More information about this series at http://www.springer.com/series/4129

ISSN 1866-2226 ISSN 1866-2234 (electronic)

Springer Tokyo Heidelberg New York Dordrecht London

Printed on acid-free paper

Springer Japan KK is part of Springer Science+Business Media (www.springer.com)

On the Integration of Fuzzy Level Sets . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 1

On the Integration of Fuzzy Level Sets

Charles Castaing, Christiane Godet-Thobie, Thi Duyen Hoang,

JEL Classification: C01, C02.

Springer Japan 2015 1

Keywords Conditional expectation Fuzzy convex Fuzzy martingale

Article type: Research Article

2 Integration of Convex Weak Star Compact Sets

Throughout this paper, .; F ; P / is a complete probability space, E is a Banach

dual of E, and B E (resp. B E ) is the closed unit ball of E (resp. E ). We denote

We denote by dH the Hausdorff distance on cwk.E/. A cc.E/-valued mapping

Recall that the topology m is metrizable, for instance, by the metric

We assume from now on that dE is held fixed. Further, we have m w

is F -measurable, that is, X G 2 F , this is a consequence of the Projection

X G D proj fGr.X / \ .  G/g:

In particular if u W ! Es is a scalarly F -measurable mapping, that is, if for

jjx u.!/jjEb D sup jhek ; x u.!/ij:

As each function .!; x / 7! hek ; x u.!/i is F B.Es /-measurable and

Let B be a sub--algebra of F and let X be a K -valued integrably bounded

SX1 .B/ WD ff 2 L1E E.; B; P / W f .!/ 2 X.!/ a.s.g

and the multivalued Aumann-Gelfand integral (shortly expectation) EX; B of X

As SX1 .B/ is .L1E E.B/; L1

Graph.X / D f.!; x / 2  Em W dE .x ; X.!// D 0g

and the mapping .!; x / 7! dE .x ; X.!// is F B.Em /-measurable.

X V D proj fGraph.X / \ .  V /g:

Hence (a) and (b) are equivalent.

Corollary 1. Let X W ! cwk.Es / be a convex weak -compact valued mapping.

w -ls Xn D fx 2 E W x D .E ; E/- lim xj I xj 2 Xnj g:

w -li Xn D fx 2 E W x D .E ; E/- lim xn I xn 2 Xn g:

w -ls Xn X1 w -li Xn a.s.

We need the following definition.

Theorem 2. Let X; Xn.n 2 N/ be a sequence in Lcwk.E 1

Proof. (a) As jX j g and jXn j g for all n 2 N, SGe1

(b) Further by the Strassen theorem [8], we have that

Applying Lebesgues theorem and (1)(2) gives

Applying Lebesgues theorem and (3) gives

3 Random Fuzzy Convex Upper Semicontinuous Integrands

Thanks to measurable properties developed in Sect. 2 we present now some appli-

a fuzzy convex upper semicontinuous variable. By upper semicontinuity and fuzzy

X .!/ WD L .X /.!/ WD fx 2 E W X! .x/  g

is closed convex. It is clear that the graph of this multifunction belongs to

Applying Lebesgues dominated convergence theorem shows that

is convex weak -compact because the set SL1 .X / is convex sequentially

4 Expectation and Conditional Expectation of Level Sets

lim .x; Lk .X /.!// D .x; L .X /.!//

for all ! 2 and for all x 2 E.

Since the w -topology coincides with the metrizable topology m , by Theorem 15

(3) is the unique closed convex B-measurable mapping such that S1 D

Theorem 5 allows to obtain the weak compactness of the conditional expectation

.v; E B S1 .F // D .v; S1 .B//

lim .x; Lk .X /.!// D .x; L .X /.!//

for all ! 2 and for all x 2 E.

is w -compact and B-measurable so that

V .!/ D w K lim E B Xk .!/:

lim .x; E B Xk .!// D .x; V .!//

.x; V .!// D lim .x; E B Xk .!// D lim E B .x; Xk .!//

X G D proj fGr.X / \ . G/g:

SX1 .B/ WD ff 2 L1E E.; B; P / W f .!/ 2 X.!/ a.s.g

and the multivalued Aumann-Gelfand integral (shortly expectation) EX; B of X

As SX1 .B/ is .L1E E.B/; L1

Graph.X / D f.!; x / 2 Em W dE .x ; X.!// D 0g

X V D proj fGraph.X / \ . V /g:

X .!/ WD L .X /.!/ WD fx 2 E W X! .x/ g

.v; E B S1 .F // D .v; S1 .B//

Step 2. fx 2 Es W '.x / g D C , for every 20; 1.

thus x 2 ' 0 . To show the converse inclusion, let x 2 ' 0 . Then

If '.x / > 0 , there exists 1 0 with x 2 C1 . But then we have C1 C0

'! .x / WD supf 2 0; 1 W x 2 E B X .!/g

fx 2 Es W '! .x / g D E B X .!/

for every ! 2 and every 20; 1, whenever 1 < 2 ; : : : < k ! .

'! .x / D supf 2 0; 1 W x 2 E B X .!/g 0

thus x 2 '! 0 . To show the converse inclusion, let x 2 '! 0 . Then

'! .x / D supf 2 0; 1 W x 2 E B X .!/g 0 :

If '! .x / > 0 , there exists 1 0 with x 2 E B X1 .!/. But then we have

for every B 2 B and for every 20; 1.

EXn D EX1 2 ck.E/; 8n 2 N

EcoXn D EcoX1 2 ck.E/; 8n 2 N

EXn D EX1 2 ck.Rd /; 8n 2 N

EXn D EcoXn D EcoX1 D EX1 2 ck.Rd /; 8n 2 N

max dH .EcoX 1C ; EX1k / < ":

EX1k EX1 EcoX 1C :

C2 max dH .EcoX 1C ; EX1k / WD I1 C I2 C I3 :

I3 D 2 max dH .EcoX 1C ; EX1k / 2":

for every 20; 1

max dH .EX 1C ; EX1k / < ":

C2 max dH .EX 1C ; EX1k / WD I1 C I2 C I3 :

a.!/ bjjx u0 .!/jjE .!; x/ 8.!; x/ 2 E:

k .!; x/ D inf .!; y/ C kjjx yjjE 8.!; x/ 2 E:

0 k .!; x/ kC1 .!; x/ .!; x/ 8k 2 N 8.!; x/ 2 E:

sup k .!; x/ D .!; x/ 8.!; x/ 2 E:

lim E Fn .!; vk;p;u .!// D .!; vk;p;u .!//:

lim sup inf E Fn .!; y/ C kjju.!/ yjjE

lim supE Fn .!; vk;p;u .!// C kjju.!/ vk;p;u .!/jjE