Bayesian selling problem with partial information

Yen‐Ming Lee and Sheldon M. Ross

Naval Research Logistics (NRL), 2013, vol. 60, issue 7, 557-570

Abstract: We introduce an optimal stopping problem for selling an asset when the fixed but unknown distribution of successive offers is from one of n possible distributions. The initial probabilities as to which is the true distribution are given and updated in a Bayesian manner as the successive offers are observed. After receiving an offer, the seller has to decide whether to accept the offer or continue to observe the next offer. Each time an offer is observed a fixed cost is incurred. We consider both the cases where recalling a past offer is allowed and where it is not allowed. For each case, a dynamic programming model and some heuristic policies are presented. Using simulation, the performances of the heuristic methods are evaluated and upper bounds on the optimal expected return are obtained. © 2013 Wiley Periodicals, Inc. Naval Research Logistics, 2013

Date: 2013
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https://doi.org/10.1002/nav.21552

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Persistent link: https://EconPapers.repec.org/RePEc:wly:navres:v:60:y:2013:i:7:p:557-570

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