Optimal Orderings for Parallel Project Selection

• Published in: International economic review (Philadelphia) Vol. 33; no. 1; pp. 79 - 89
• Main Author: Vishwanath, Tara
• Format: Journal Article
• Language: English
• Published: Philadelphia, Pa The Economics Department of the University of Pennsylvania, and the Osaka University Institute of Social and Economic Research Association 01-02-1992; University of Pennsylvania, Economics Dept., and Osaka University Institute of Social and Economic Research; Blackwell Publishing Ltd
• Subjects: Applications; Cost efficiency; Dynamic programming; Economic models; Economic statistics; Economic theory; Economics; Expected utility; Information search; Marginal costs; Optimal strategies; Projects; Random variables; Selection; Studies; Total utility; Utilities costs; Utility functions
• ISSN: 0020-6598; 1468-2354
• DOI: 10.2307/2526984

Suppose there are a finite number n of activities or projects, each yielding an unknown reward at an uncertain time. Several m (< n) projects may be undertaken in parallel (simultaneously), and the projects may be selected sequentially in any order desired. Optimal strategies, which maximize the expected discounted utility of the rewards obtained, are in general complex to determine. We present general conditions in terms of risk and stochastic ordering of the distributions associated with projects, which result in simple optimal rules. The underlying trade-offs between reward and yield times are discussed. A few illustrations involving search and exploration are given.