Publication
Title
Skiba points in free end-time problems
Author
Abstract
Since the end of the seventies Skiba points have been studied in infinite time optimal control problems with multiple steady states. At such a Skiba point the decision maker is indifferent between choosing trajectories that approach different steady states. This paper extends this theory towards free end-time optimal control problems, where the decision maker collects a salvage value at the endogenous horizon date. In particular, besides operating forever, the decision maker can choose to stop operations immediately, or to operate during a finite time interval after which the decision maker stops and collects a salvage value. This paper illustrates the new theory with a firm-level capital accumulation problem in which the manager has the option to sell the firm (be acquired) at any time. This situation may be relevant for certain high-tech start-ups that create intellectual property which may be of value to an acquiring firm and which is hard for an outside firm to tap in other ways (e.g., via licensing). (C) 2014 Elsevier B.V. All rights reserved.
Language
English
Source (journal)
Journal of economic dynamics and control. - Amsterdam
Publication
Amsterdam : 2015
ISSN
0165-1889
Volume/pages
51(2015), p. 404-419
ISI
000349576900022
Full text (Publisher's DOI)
Full text (publisher's version - intranet only)
UAntwerpen
Faculty/Department
Research group
Publication type
Subject
Affiliation
Publications with a UAntwerp address
External links
Web of Science
Record
Identification
Creation 08.05.2015
Last edited 29.07.2017
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