Thijssen, Jacco Johan Jacob orcid.org/0000-0001-6207-5647 and Bregantini, Daniele orcid.org/0000-0001-6802-1551 (2017) Costly Sequential Experimentation and Project Valuation with an Application to Health Technology Assessment. Journal of Economic Dynamics and Control. pp. 202-229. ISSN 0165-1889
Abstract
We study the optimal investment/abandonment decision for a project, where costly sequential experimentation provides information about its true profitability. We derive the optimal decision rule by appropriately extending the Bayesian framework of sequential hypothesis testing. The optimal decision time takes the form of the first exit time of a particular inaction region. We find that increased noise in the observations lowers the value of the project, and that the effect on the expected time at which a decision is taken is ambiguous. Delays in observations affect both project value and the inaction region. The model is illustrated with a health technology assessment application using data on standard versus robot-assisted laporascopic prostatectomy.
Metadata
Item Type: | Article |
---|---|
Authors/Creators: |
|
Copyright, Publisher and Additional Information: | © Elsevier, 2017. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. |
Keywords: | Health technology assessment,Optimal stopping,Sequential experimentation |
Dates: |
|
Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > The York Management School |
Depositing User: | Pure (York) |
Date Deposited: | 01 Mar 2017 10:20 |
Last Modified: | 25 Jan 2025 00:06 |
Published Version: | https://doi.org/10.1016/j.jedc.2017.01.016 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1016/j.jedc.2017.01.016 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:113052 |