A note on optimal switching between two activities

Steven E. Shreve

Naval Research Logistics Quarterly, 1981, vol. 28, issue 1, 185-190

Abstract: Let f1 and f2 map [0, T] into the real numbers. A system is following either f1 or f2 and earning the associated reward ∫ f1 or ∫ f2, respectively. It is possible at any time to switch from fi to fj by paying a switching cost b > 0. We determine a switching policy which maximizes the total reward. Conditions which guarantee a planning horizon are established.

Date: 1981
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Persistent link: https://EconPapers.repec.org/RePEc:wly:navlog:v:28:y:1981:i:1:p:185-190

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