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The Virtues of Hesitation

Author

Listed:
  • Urmee Khan

    (Department of Economics, University of California Riverside)

  • Maxwell Stinchcombe

    (University of Texas, Austin)

Abstract

. In many economic, political and social situations, circumstances change at random points in time, reacting is costly, and reactions appropri- ate to present circumstances may become inappropriate upon future changes, requiring further costly reaction. Waiting is informative if arrival of the next change has non-constant hazard rate. We identify two classes of situations: in the first, delayed reaction is optimal only when the hazard rate of further changes is decreasing; in the second, it is optimal only when the hazard rate of further changes is increasing. These results in semi-Markovian decision theory provide motivations for building delay into decision systems.

Suggested Citation

  • Urmee Khan & Maxwell Stinchcombe, 2012. "The Virtues of Hesitation," Working Papers 201425, University of California at Riverside, Department of Economics, revised Sep 2014.
    • Handle: RePEc:ucr:wpaper:201425
    as

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    File URL: https://economics.ucr.edu/repec/ucr/wpaper/201425.pdf
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    File URL: https://economics.ucr.edu/repec/ucr/wpaper/201425R.pdf
    File Function: Revised version, 2014
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    References listed on IDEAS

    as
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    Cited by:

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    2. Sander Heinsalu, 2020. "Infection arbitrage," Papers 2004.08701, arXiv.org, revised Apr 2020.

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