Decomposing risk in an exploitation–exploration problem with endogenous termination time

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dc.contributor.authorÁlvarez González, Francisco
dc.date.accessioned2023-06-17T22:46:13Z
dc.date.available2023-06-17T22:46:13Z
dc.date.issued2018
dc.description.abstractAn expected utility risk averse maximizer must decide on an investment policy for a set of N projects. The budget for investment is fixed and it is allocated to the projects gradually over time by an endogenously determined amount. We allow for simultaneous investments in different projects as well as investments in the same project at different times. The termination time is endogenous. The problem finishes, at latest, when the budget is fully depleted. Our problem has an exploitation versus exploration trade off. There are unknown relevant characteristics of each project that the decision maker only learns by investing in the corresponding project. We analyze the performance of dynamic programming based policies. Particularly, we use differences in the value functions of N single-project problems to construct the opportunity cost of investing in each project. Those opportunity costs drive the investment policy for the N project problem.
dc.description.departmentDepto. de Análisis Económico y Economía Cuantitativa
dc.description.facultyFac. de Ciencias Económicas y Empresariales
dc.description.refereedTRUE
dc.description.sponsorshipMinisterio de Economía y Competitividad (MINECO)
dc.description.statuspub
dc.eprint.idhttps://eprints.ucm.es/id/eprint/57226
dc.identifier.issn1572-9338
dc.identifier.officialurlhttps://doi.org/10.1007/s10479-017-2610-4
dc.identifier.urihttps://hdl.handle.net/20.500.14352/18843
dc.issue.number1-2
dc.journal.titleAnnals of Operations Research
dc.language.isoeng
dc.page.final77
dc.page.initial45
dc.publisherSpringer Nature
dc.relation.projectIDECO2014-56676-C2-2-P
dc.rights.accessRightsrestricted access
dc.subject.jelC44
dc.subject.jelC61
dc.subject.keywordExploitation–exploration
dc.subject.keywordDynamic programming
dc.subject.keywordRisk.
dc.subject.ucmOptimización matemática
dc.subject.ucmEconometría (Economía)
dc.subject.unesco5302 Econometría
dc.titleDecomposing risk in an exploitation–exploration problem with endogenous termination time
dc.typejournal article
dc.volume.number261
dspace.entity.typePublication
relation.isAuthorOfPublication5c6d1bab-3a96-455e-96d4-556c4c6c23da
relation.isAuthorOfPublication.latestForDiscovery5c6d1bab-3a96-455e-96d4-556c4c6c23da
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