Robust optimal R&D investment under technical uncertainty in a regime-switching environment. (English) Zbl 1489.91123
Summary: 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.
MSC:
| 91B38 | Production theory, theory of the firm |
| 49L20 | Dynamic programming in optimal control and differential games |
| 60J20 | Applications of Markov chains and discrete-time Markov processes on general state spaces (social mobility, learning theory, industrial processes, etc.) |
| 91A15 | Stochastic games, stochastic differential games |
| 93C30 | Control/observation systems governed by functional relations other than differential equations (such as hybrid and switching systems) |
| 93E20 | Optimal stochastic control |
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