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Two-parameter optimal stopping problem with switching costs

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  • Tanaka, Teruo

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.

Suggested Citation

  • Tanaka, Teruo, 1990. "Two-parameter optimal stopping problem with switching costs," Stochastic Processes and their Applications, Elsevier, vol. 36(1), pages 153-163, October.
    • Handle: RePEc:eee:spapps:v:36:y:1990:i:1:p:153-163
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