Myopic Solutions of Homogeneous Sequential Decision Processes

Case Western Reserve University, Department of Operations Working Paper No. TM-810

21 Pages Posted: 13 Jul 2006

See all articles by Matthew J. Sobel

Matthew J. Sobel

Case Western Reserve University; Weatherhead School of Management, Case Western Reserve University

Wei Wei

Case Western Reserve University - Department of Operations

Date Written: June 23, 2006

Abstract

An optimum of a Markov decision process (MDP) is said to be myopic if it can be specified by solving a series of static problems. We identify new classes of MDPs with myopic optima and sequential games with myopic equilibrium points. In one of the classes the single-period reward is homogeneous with respect to the state variable. We illustrate the results with models of revenue management and investment.

Keywords: myopic solution, Markov decision process, dynamic program, homogeneous, sequential game, equilibrium point

JEL Classification: C61, C63, C73

Suggested Citation

Sobel, Matthew J. and Sobel, Matthew J. and Wei, Wei, Myopic Solutions of Homogeneous Sequential Decision Processes (June 23, 2006). Case Western Reserve University, Department of Operations Working Paper No. TM-810, Available at SSRN: https://ssrn.com/abstract=911577 or http://dx.doi.org/10.2139/ssrn.911577

Matthew J. Sobel (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

HOME PAGE: http://https://weatherhead.case.edu/faculty/emeriti-faculty/matthew-sobel

Weatherhead School of Management, Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

Wei Wei

Case Western Reserve University - Department of Operations ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

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