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http://dx.doi.org/10.7232/IEIF.2011.24.4.295

Asset Buying Problem with Consideration of the Budget Constraints and Loan  

Son, Jae-Dong (Department of Industrial and Information Systems Engineering Soongsil University)
Publication Information
IE interfaces / v.24, no.4, 2011 , pp. 295-303 More about this Journal
Abstract
This paper presents a discrete time optimal asset buying problem with a predetermined final deadline where an available budget is limited. A cost is paid to search for assets called the search cost. A seller who shows up offers a price for the asset and then the buyer decides whether or not to buy the asset by comparing the offered price to his optimal selection threshold. When the budget becomes less than the search cost or the price of the asset the buyer can get a necessary loan with some interests. We clarify the properties of the buyer's optimal selection threshold in order to maximize the expected value of budget which is left after paying all the search costs and the price of the asset at that point in time.
Keywords
asset buying problem; optimal stopping problem; limited budget; loan; search cost;
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