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 Stage
The point at which a decision is made is known as a stage. The end
of a stage marks the beginning of the immediate succeeding stage. For
instance, in the salesmen allocation problem, each territory represents
a stage; in the shortest route problem, each city represents a stage.
State
Conceptually, the variable that links two stages in a multistage decision
problem is called a state variable. At any stage, the values that state
variables can take describe the status of the problem. These values
are referred to as states. For example, in the shortest route problem,
a city is referred to as state variable.
Principle
of Optimality
The principle of optimality states that the optimal decision from
any state in a stage to the end, is independent of how one actually
arrives at that state.
Optimal Policy
A policy which optimizes the value of an objective function is called
an optimal policy.
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