An entry-exit model involving construction and abandonment periods |
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| Authors: | Yong-Chao Zhang Yi Zhang |
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| Affiliation: | 1. School of Mathematics and Statistics, Northeastern University at Qinhuangdao, Qinhuangdao 066004, China;2. School of Economics, Northeastern University at Qinhuangdao, Qinhuangdao 066004, China |
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| Abstract: | We analyze, using the optimal stopping theory, the entry-exit decision on a project, which takes time to be constructed and abandoned. We obtain the closed-form expressions of optimal start time of entry, optimal start time of exit, and the maximal expected present value of the project. In addition, we examine the effects of construction and abandonment periods on the optimal start times of entry and exit. |
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| Keywords: | abandonment period construction period optimal stopping problem start time of entry start time of exit |
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