Optimal Product Lifecycle and Partial Information with Active Learning

Arik Sadeh ()
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Arik Sadeh: Department of Management of Technology, Holon Academic Institute of Technology, 52 Golomb St. Holon 58102, Israel

Computational Economics, 2003, vol. 21, issue 1_2, 125-136

Abstract: During production processes there is an accumulation of uncertainty about production and its output. However, decision-makers can reduce uncertainty by taking measurements. The role of value of measurements is discussed in a dynamic production framework where the number of measurements depends on the attitude of a decision-maker toward risk, the unit cost of a measurement and its impact on the uncertainty, and the level of production and its quality. A model describing the way of handling such information in an active learning framework is shown by considering the impact of future uncertainty on current decisions. The model is illustrated using given functional forms and a numerical example. It is shown how the production level and its quality are affected by the unit price of a measurement.

Date: 2003
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