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

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  • Ma, Qingyin
  • Stachurski, John
Abstract
By extending a methodology dating back to Jovanovic (1982), we develop a comprehensive theory of optimal timing of decisions based on continuation value functions and operators that act on them. Rewards can be bounded or unbounded. One advantage of this approach over standard Bellman methods is that continuation value functions are smoother than value functions. Another is that, for a range of problems, the continuation value function exists in a lower dimensional space than the value function. We exploit these advantages to obtain a range of new results on optimality, optimal behavior and efficient computation.

Suggested Citation

  • Ma, Qingyin & Stachurski, John, 2019. "Optimal timing of decisions: A general theory based on continuation values," Journal of Economic Dynamics and Control, Elsevier, vol. 101(C), pages 62-81.
    • Handle: RePEc:eee:dyncon:v:101:y:2019:i:c:p:62-81
    DOI: 10.1016/j.jedc.2019.02.003
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    Cited by:

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    More about this item

    Keywords

    Continuation values; Dynamic programming; Optimal timing;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E00 - Macroeconomics and Monetary Economics - - General - - - General

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