The Virtues of Hesitation: Optimal Timing in a Non-stationary World

Urmee Khan and Maxwell B. Stinchcombe

American Economic Review, 2015, vol. 105, issue 3, 1147-76

Abstract: In many economic, political, and social situations, circumstances change at random points in time, reacting is costly, and reactions appropriate to present circumstances may become inappropriate upon future changes, requiring further costly reaction. Waiting is informative if arrival of the next change has non-constant hazard rate. We identify two classes of situations: in the first, delayed reaction is optimal only when the hazard rate of further changes is decreasing; in the second, it is optimal only when the hazard rate of further changes is increasing. These results in semi-Markovian decision theory provide motivations for building delay into decision systems. (JEL C61, D72, D82, D83, K10, M11)

JEL-codes: C61 D72 D82 D83 K10 M11 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20121282
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.20121282 (application/pdf)
https://www.aeaweb.org/aer/app/10503/20121282_app.pdf (application/pdf)
https://www.aeaweb.org/aer/ds/10503/20121282_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:105:y:2015:i:3:p:1147-76

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().