Stochastic impulse control with regime-switching dynamics

Ralf Korn, Yaroslav Melnyk and Frank Thomas Seifried

European Journal of Operational Research, 2017, vol. 260, issue 3, 1024-1042

Abstract: Optimal product management problems with multiple product generations in continuous time lead to the consideration of dynamic optimal control problems that feature both intervention costs and partially controlled regime shifts. We therefore investigate and solve such stochastic impulse control problems with regime-switching in a general setting. We analyze the associated coupled systems of quasi-variational inequalities in suitable Sobolev spaces, and we establish a direct approach to construct both the value function and optimal strategies. Our results in particular yield a numerical method for the computation of the optimal value function and the associated strategies.

Keywords: Control; Product life cycle; Stochastic impulse control; Intervention costs; Regime shifts (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:260:y:2017:i:3:p:1024-1042

DOI: 10.1016/j.ejor.2016.12.029

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