Article ID: | iaor201112771 |
Volume: | 58 |
Issue: | 6 |
Start Page Number: | 578 |
End Page Number: | 594 |
Publication Date: | Sep 2011 |
Journal: | Naval Research Logistics (NRL) |
Authors: | Kornish Laura J, Lippman Steven A, Mamer John W |
Keywords: | simulation: applications, markov processes, adaptive processes, optimization, learning |
Modeling R&D as standard sequential search, we consider a monopolist who can implement a sequence of technological discoveries during the technology search process: he earns revenue on his installed technology while he engages in R&D to find improved technology. What is not standard is that he has a finite number of opportunities to introduce improved technology. We show that his optimal policy is characterized by thresholds ξ