Optimal Stopping of the Integral of a Wiener Process

Miroshnichenko, Taisia

doi:10.1137/1120044

Cited by 15 publications

(2 citation statements)

References 2 publications

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“…The existence of an optimum for (5) has been shown elsewhere (see, for example, Shepp 1969 andMiroschnichenko 1975). Here I show that the optimal barrier is Eq.…”

Section: Proof Of Proposition 1 22supporting

confidence: 64%

Protection without Capture: Product Approval by a Politically Responsive, Learning Regulator

2004

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W hen policy arrangements appear to favor well-organized and wealthy interests, should we infer "capture" of the political process? In particular, might larger firms receive regulatory "protection" even when the regulatory agency is not captured by producers? I model regulatory approval--product approval, licensing, permitting and grant making--as a repeated optimal stopping problem faced by a learning regulator subject to variable political pressure. The model is general but stylistically applied to pharmaceutical regulation. Under the assumption that consumers are differentially organized, but producers are not, there nonetheless exist two forms of "protection" for larger, older producers. First, firms submitting more applications may expect quicker and more likely approvals, even in cases where their reputations for safety are below industry average. Second, "early entrants" to an exclusive market niche (disease) receive shorter expected approval times than later entrants, even when later entrants offer known quality improvements. The findings extend to cases of bounded rationality and a reduced form of endogenous firm submissions. The model shows that even interest-neutral "consumer" regulation can generate protectionist outcomes, and that commonly adduced evidence for capture is often observationally equivalent to evidence for other models of regulation.The theory [of economic regulation] tells us to look, as precisely and carefully as we can, at who gains and who loses, and how much, when we seek to explain a regulatory policy . . . . It is of course true that the theory would be contradicted if, for a given regulatory policy, we found the group with larger benefits and lower costs of political action being dominated by another group with lesser benefits and higher cost of political action . . . .The first purpose of the empirical studies is to identify the purpose of the legislation! The announced goals of a policy are sometimes unrelated or perversely related to its actual effects, and the truly intended effects should be deduced from the actual effects.--George J. Stigler, "The Theory of Economic Regulation" (1975, 140) The prospect for any change in the [OSHA cotton dust] standard, however, is not great. Now that the large firms in the industry are in compliance, they no longer advocate changes in the regulation. Presumably, the Daniel P. Carpenter is Professor,

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“…The existence of an optimum for (5) has been shown elsewhere (see, for example, Shepp 1969 andMiroschnichenko 1975). Here I show that the optimal barrier is Eq.…”

Section: Proof Of Proposition 1 22supporting

confidence: 64%

Protection without Capture: Product Approval by a Politically Responsive, Learning Regulator

2004

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“…Data supporting the optimal free boundary are given in Table 1. 7 Data supporting the shape of the value function along x = y are given in Table 11.…”

Section: -0mentioning

confidence: 99%

Two‐state‐variable stochastic tree problems

1989

Appl. Stochastic Models Data Anal.

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SUMMARYThis paper extends the one-state-variable stochastic tree problem to the two-state-variable case. (Considering, for example, a tree whose size and price evolve according to two different Wiener processes, we solve for the optimal cutting time. The optimization of the expected present discounted value of the tree is converted to a standard free-boundary problem. Analytical results are reported. In particular we hnd that more variance near the optimal free boundary will increase the value of the tree. Finally, a method is developed to find the numerical solution to the free boundary problem. A numerical example is presented.

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