Strike when the force is with you: optimal stopping
with application to resource equilibria.
by Cairns, Robert D.^Davis, Graham A.
(12) Their condition arises because, under the stationary
conditions frequently studied in intertemporal models, waiting to invest
has a cost, viz., interest on the optimized value of continuing the
sequence immediately.
(13) It is obviously true under stationary conditions, when
V([T.sub.2]) - 0.
(14) The market value L(t) is the discounted forward value assuming
optimal choices of future planting and harvest times. It is the value of
the option to plant.
(15) The forward value of planting at [t.sub.i+1] <
[t.sup.*.sub.i+1]) is less than the market value:[MATHEMATICAL
EXPRESSION NOT REPRODUCIBLE IN ASCII], and that forward value is rising
at a rate greater than r percent.
Robert D. Cairns is professor in the Department of Economics,
McGill University, Montreal, QC, Canada. Graham A. Davis is professor in
the Division of Economics and Business, Colorado School of Mines,
Golden, CO.
Table 1 Decision Inputs
Mine L L H H
t p I W I W
1 400 200 200 60 * 560 *
2 410 200 * 216 * 90 * 571 *
3 416 200 * 159 * 180 * 516 *
4+ 350 200 93 30 236
* indicates numbers refer to a special set of numbers.
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