Robust optimal R&D investment under technical uncertainty in a regime-switching environment. (3rd June 2022)

• Record Type: Journal Article
• Authors: Wang, Ming-hui; Huang, Nan-jing
• Is Part Of: Optimization. Volume 71:Number 6(2022)
• Page Start: 1557
• Page End: 1578
• Publication Date: 2022-06-03
• Subjects: Regime-switching -- research and development -- HJBI equation -- change of measures; 60J20 -- 91A15 -- 91B38 -- 93C30 -- 93E20; Mathematical optimization -- Periodicals; 519.7
• DOI: 10.1080/02331934.2020.1818745
• Languages: English
• ISSNs: 0233-1934

Abstract

ABSTRACT: In this paper, we extend the classic optimal research and development (R&D) investment model into the regime-switching environment. We formulate a robust model to obtain the maximal net value function of the R&D project under a family of real-world measures, which can also be regarded as a stochastic differential game. Then, the verification argument is provided. Though we do not find the closed-form solution, we give a numerical simulation to further study the qualities of the solution to our model.