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 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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