Optimal timing of decisions: a general theory based on continuation values

DOI10.1016/J.JEDC.2019.02.003zbMATH Open1411.91194arXiv1703.09832OpenAlexW2745450580WikidataQ128409346 ScholiaQ128409346MaRDI QIDQ1734573FDOQ1734573

Authors: Qingyin Ma, John Stachurski 

Publication date: 27 March 2019

Published in: Journal of Economic Dynamics and Control (Search for Journal in Brave)

Abstract: Building on insights of Jovanovic (1982) and subsequent authors, we develop a comprehensive theory of optimal timing of decisions based around continuation value functions and operators that act on them. Optimality results are provided under general settings, with bounded or unbounded reward functions. This approach has several intrinsic advantages that we exploit in developing the theory. One is that continuation value functions are smoother than value functions, allowing for sharper analysis of optimal policies and more efficient computation. Another is that, for a range of problems, the continuation value function exists in a lower dimensional space than the value function, mitigating the curse of dimensionality. In one typical experiment, this reduces the computation time from over a week to less than three minutes.

Full work available at URL: https://arxiv.org/abs/1703.09832

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zbMATH Keywords

dynamic programmingoptimal timingcontinuation values

Mathematics Subject Classification ID

Decision theory (91B06) Dynamic programming (90C39) Microeconomic theory (price theory and economic markets) (91B24)

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Cited In (7)

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• Reward-rate maximization in sequential identification under a stochastic deadline
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