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Proceeding similarly we can compute the dierences between two successive second dierences and obtain the third dierences of the function:
|w
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like, provided that they are all shifted by the same amount (neglecting this
proviso would alter the structure of the equation).
Consider now the equation |w = d> i.e. |wn |w = d= In words, the
problem is: nd a function such that its rst dierence equals the given
constant d for any value of w= It can be checked that the linear function
| = dw + e satises the equation, since
|wn |w = [d(w + 1) + e] (dw + e) = d=
Note that in the solution function an arbitrary constant (e) appears. This
is not surprising, since the constancy of rst dierences is not aected by a
parallel shift of the straight line. More generally, in the operation of dierencing, the presence of an arbitrary constant, that is eliminated in the course
of the operation, does not alter the result. Therefore, an arbitrary constant
always appears in the solution of a rst-order dierence equation, and no
more than one can appear.
Proceeding further, consider the equation 2 |w = 0 (nd a function such
that its second dierence equals zero for any value w). The solution is always the linear function | = dw + e, but now both d and e are arbitrary
constants; in fact, any straight line has a zero second dierence. In general,
the computation of second dierence eliminates in succession two (and only
two) arbitrary constants.
We shall see later on how the arbitrary constant(s) can be determined
through additional conditions; what interests us here is to note that we can
induce, from the reasoning above, the following important theorem:
Theorem 2=1 The general solution of a dierence equation of order n is
a function of t involving exactly n arbitrary constants.
2.2
(2.1)
where the f s are given constant and j(w) is a known function. Some f s
may be zero, but of course both fq and ff must be dierent from zero if the
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Actually, this function is also the only one that satises the equation. This is shown
by the `existence and uniqueness' theorem, which we shall not treat. All types of equations
considered in this book are `well-behaved', i.e. their solution exists and is unique.
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equation is of order q. Eq. (2.1) is called the forward form; the equivalent
backward form is
fq |w + fq3 |w3 + === + f |w3qn + ff |w3q = j(w)=
(2.2)
(2.3)
The reason for dealing with these two forms separately is that the solution
of Eq. (2.1) can be obtained in a relatively simple manner when the solution
of Eq. (2.3) is known.
2.2.1
The following theorems are fundamental in the theory of homogeneous difference equations:
Theorem 2=2 If | (t) is a solution of the homogeneous equation, then
D| (w), where A is an arbitrary constant, is also a solution.
The proof is simple. Assume that | (w) satises Eq. (2.3). Substitute
D| (w) in the same equation, obtaining
fq D| (w + q) + fq3 D| (w + q 1) + === + f D| (w + 1) + ff D| (w) = 0;
therefore
D[fq | (w + q) + fq3 | (w + q 1) + === + f | (w + 1) + ff | (w)] = 0=
If D| (w) has to be a solution the last relation must be satised. Since
| (w) is a solution of Eq. (2.3), the expression in square brackets vanishes,
and so the relationship
D[fq | (w + q) + fq3 | (w + q 1) + === + f | (w + 1) + ff | (w)] = 0
is satised. This proves the theorem.
Before going on to the next theorem, it is as well to recall the notion of
linearly independent functions.
Given q functions | (w)> |2 (w)> ===> |q (w), they are said to be linearly dependent if q constants D > D2 > ===> Dq exist, which do not all vanish, and such
that the equation
A y (t) + A2 y2 (t) + === + Ap yp (t) = 0
(2.4)
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(2.5)
where y (t)> y 2 (t)> ===> y q (t) are n linearly independent solutions of Eq. (2.3),
and D > D2> ===> Dq are arbitrary constants.
The proof is straightforward: by Theorem 2.3, the function (2.5) is a solution of the dierence equation (2.3). Since this function contains exactly
q arbitrary constants, we can conclude|from Theorem 2.1|that it is the
general solution of Eq. (2.3). The practical problem of how to nd the q
functions y (t), y 2 (t), ..., y q (t) will be tackled in the following chapters; for
the moment we observe that, given a homogeneous equation of order q, a set
of q linearly independent solutions is called a fundamental set. The condition
for a set of q solutions to form a fundamental set is contained in Theorem 2.5.
Theorem 2.5 Let y (t)> y 2 (t)> ===> y q (t) be n solutions of Eq. (2.3). They
are linearly independent (i.e. form a fundamental set) if, and only if, the
following determinant (called the Casorati determinant)
G(w) =
| (w)
| (w + 1)
===
| (w + q 1)
|2 (w)
|2 (w + 1)
===
|2 (w + q 1)
===
===
===
===
|q (w)
|q (w + 1)
===
|q (w + q 1)
(2.6)
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D | (w)
D | (w + 1)
===
D | (w + q 1)
+D2 |2 (w)
+D2 |2 (w + 1)
===
+D2 |2 (w + q 1)
+===+
+===+
===
+===+
Dq |q (w)
Dq |q (w + 1)
===
Dq |q (w + q 1)
= 0>
= 0>
===
= 0>
(2.7)
which is a system of homogeneous linear equations. According to a wellknown theorem in elementary algebra, when G(w) 9= 0, system (2.7) admits
only the null solution, i.e. holds true if, and only if, D = D2 = === = Dq = 0,
which is the denition of linearly independent functions (see above). On
the contrary, G(w) = 0 is the necessary and sucient condition for system
(2.7) to possess non-trivial solutions (i.e., solutions with at least one non-zero
Dl > l = 1> 2> ===> q), which is the denition of linearly dependent functions.
2.2.2
(2.8)
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equation, and the expression `reduced equation' is used to indicate the homogeneous part of a non-homogeneous equation, i.e. the corresponding homogeneous equation obtained putting j(w) 0 in the course of the procedure to
solve a non-homogeneous equation. To avoid confusion, we shall not adopt
these uses.
Theorem 2.6 contains the method to follow for solving the non-homogeneous equation:
(a) nd a particular solution |(w) of the non-homogeneous equation;
(b) put j(w) 0 and solve the resulting homogeneous equation (often
called the `reduced' equation);
(c) add the two results.
Steps (a) and (b) can be taken in any order; step (c) gives the general
solution of the non-homogeneous equation.
The particular solution of the non-homogeneous equation will depend,
ceteris paribus, on the form of the known function j(w)= This suggest the following general approach: to nd a particular solution of the non-homogeneous
equation, try a function having the same form of g(t) but with undetermined
constant(s) (e.g., if j(w) is a constant, try an undetermined constant; if it
is an exponential function, try the same exponential function with an undetermined multiplicative constant, and so on). Substitute this function in
the non-homogeneous equation and determine the coecient(s) so that the
equation is satised.
This method|called method of undetermined coecients|will be expounded in more detail in the following chapter, where we shall also examine
the cases in which it cannot be applied.
It is interesting to note, from the economic point of view, that in the
general solution of the non-homogeneous equation the particular solution
|(w) may usually be interpreted as the equilibrium state of the variable | (a
stationary equilibrium or a moving equilibrium according to whether |(w) is a
constant or a function of w ). The component i (w; D > D2 > ===> Dq ) in Eq. (2.8)
may then be interpreted as giving the deviations from the equilibrium. Of
course, from the mathematical point of view it is always true that |(w)
| (w) =
i (w; D > D2 > ====> Dq )> independently of the possibility of giving an economic
interpretation to the particular solution |(w)=
2.3
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= |f
= |
===
= |q3
for
for
===
for
w
w
===
w
= 0>
= 1>
===
= q 1>
where |f > | > ========|q3 are known values (whence the name of initial conditions). Substituting such values in the general solution, we obtain a system of
q linear equations in the q unknowns D > D2 > =======> Dq = Consider for example
the general solution of Eq. (2.1)
|(w) = D | (w) + D2 |2 (w) + ======= + Dq |q (w) + |(w)>
where | (w)> |2 (w)> |q (w) are q distinct solutions of the corresponding homogeneous equation. Substituting the given values |f etc. in the place of |(0)
etc. we obtain, after rearranging terms,
D | (0) + D2 |2 (0) + === + Dq |q (0)
D | (1) + D2 |2 (1) + === + Dq |q (1)
===
D | (q 1) + D2 |2 (q 1) + === + Dq |q(q 1)
= |f |(0)>
= | |(1)>
(2.9)
===
= |q3 |(q 1)>
where of course |(0)> |(1)> ====== |(q 1) are absent if we consider the solution
of the homogeneous equation (2.3). System (2.9) is a linear system whose
determinant is
G(0) =
| (0)
| (1)
===
| (q 1)
|2 (0)
|2 (1)
===
|2 (q 1)
===
===
===
===
|q (0)
|q (1)
===
|q (q 1)
It is easy to see that G(0) coincides with the determinant G(w)|as dened
in Eq. (2.6)|for w = 0= Since the functions | (w)> |2 (w)> ===> |q (w) form a fundamental set, G(w) is dierent from zero for any w, and so also for w = 0. It
follows that G(0) 9= 0. Thus system (2.9) can always be solved.
We now have enough general principles to pass on to a detailed treatment
of the dierence equations of the various orders.
2.4
References
2.4. References
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