Three iterations of the method of successive approximations

Reference no: EM131104713

For Prob. 21.5-1, use three iterations of the method of successive approximations to approximate an optimal policy.

Prob. 21.5-1

Joe wants to sell his car. He receives one offer each month and must decide immediately whether to accept the offer. Once rejected, the offer is lost. The possible offers are $600, $800, and $1,000, made with probabilities 5/8, ¼ and 1/8 respectively (where successive offers are independent of each other). There is a maintenance cost of $60 per month for the car. Joe is anxious to sell the car and so has chosen a discount factor of α = 0.95. Using the policy improvement algorithm, find a policy that minimizes the expected total discounted cost.

Reference no: EM131104713

Questions Cloud

Calculate the working capital and current ratio : Calculate the working capital and current ratio at each balance sheet date. Round your current ratio answers to two decimal places. Working Capital = Current Assets less Current Liabilities.

Identifies type of property involved from legal perspective : Identifies the type of property involved from a legal perspective and the legal decision to be made in relation to Bonzi - Identifies a legal rule which applies to people like Bonzi in the situation he finds himself

What are some actions that stockholders : What are some actions that stockholders can take to ensure that managements and stockholders interests are aligned?

Use the policy improve ment algorithm to determine : The price of a certain stock is fluctuating between $10, $20, and $30 from month to month. Market analysts have predicted that if the stock is at $10 during any month, it will be at $10 or $20 the next month, with probabilities 4/5 and 1/5 respect..

Three iterations of the method of successive approximations : Joe wants to sell his car. He receives one offer each month and must decide immediately whether to accept the offer. Once rejected, the offer is lost.

How much time does it take the passenger to reach : How much time does it take the passenger to reach the opposite end of the walkway?

Describe gaps or limitations associated with that literature : Describe one or more gaps/limitations associated with that literature: gaps/limitations refer to theoretical, empirical, and/or methodological limitations that require further research.

Which action would be better : Should stockholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action increases a firm's stock price from a current level of $20 to $25 in 6 months and then to $30 in 5 years

What are the rights and potential liabilities : What are the rights and potential liabilities of the tug owner, (2) the cargo owner, (3) the Sea Tow, and (4) the Coast Guard. Why? Explain fully. Must be in own words.

User Account

All Pages