A1 Refereed original research article in a scientific journal
A sequential stopping problem with costly reversibility
Authors: Lempa, Jukka; Saarinen, Harto; Taipale, Tarmo
Publisher: Applied Probability Trust
Publication year: 2025
Journal: Journal of Applied Probability
ISSN: 0021-9002
eISSN: 1475-6072
DOI: https://doi.org/10.1017/jpr.2025.10033
Publication's open availability at the time of reporting: Open Access
Publication channel's open availability : Partially Open Access publication channel
Web address : https://www.cambridge.org/core/journals/journal-of-applied-probability/article/sequential-stopping-problem-with-costly-reversibility/2EE4DD82CD3CDD8CDA0C9CA91C67CFD6
Self-archived copy’s web address: https://research.utu.fi/converis/portal/detail/Publication/508218530
Self-archived copy's licence: CC BY
Self-archived copy's version: Publisher`s PDF
We study sequential optimal stopping with partial reversibility. The optimal stopping problem is subject to implementation delay, which is random and exponentially distributed. Once the stopping decision is made, the decision maker can, by incurring a cost, call the decision off and restart the stopping problem. The optimization criterion is to maximize the expected present value of the total payoff. We characterize the value function in terms of a Bellman principle for a wide class of payoff functions and potentially multidimensional strong Markov dynamics. We also analyse the case of linear diffusion dynamics and characterize the value function and the optimal decision rule for a wide class of payoff functions.
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Funding information in the publication:
The Foundation for Economic Education (Liikesivistysrahasto) and OP Research Foundation (grant number 20240114) are acknowledged for funding.
