Optimal resource allocation program in a two-sector economic model with a Cobb-Douglas production function (Q2430886)

Consider the following situation: in a two-sector economy there is produced one good that serves accumulating capital in two sectors of an economy, the production of the good depends on the levels of capital in the two sectors via Cobb-Douglas production function; the economy's problem is how to distribute the produced good between sectors so as to maximize the terminal level of capital in one (but fixed) of the sectors. A solution to the allocation problem of the type presented above is delivered in the paper and the corresponding continuous optimal control problem is explicitly solved with help of the Pontryagin maximum principle. First, the original problem is transformed to a boundary value problem, whose solution is proved to be the optimal solution of the original problem, and then the solution is explicitly obtained. The interesting thing is that the solution is complete in the sense that it covers even the singular case, where the Hamiltonian does not explicitly depend on control variable.