Two-parameter optimal stopping problem with switching costs

Teruo Tanaka

Stochastic Processes and their Applications, 1990, vol. 36, issue 1, 153-163

Abstract: This paper is concerned with the optimal stopping problem for discrete time two-parameter stochastic processes with index set N2. We introduce switching costs in addition to a running reward process and a terminal reward process, construct optimal tactics, that is, the rules of switching and stopping, which maximize the expected total discounted reward including switching costs. A dynamic programming approach is developed. We also specialize our general results to two-parameter Markov case.

Keywords: two-parameter; stochastic; process; strategy; tactic; switching; cost; two-parameter; Markov; process; optimal; stopping (search for similar items in EconPapers)
Date: 1990
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