Optimal stopping decision of R&D project under conditions of uncertainty

This paper discusses the research and development decision problem without rivalry. Specifically, the inter-arrival times and jump magnitudes are characterized as random variables with arbitrary probability distributions. Furthermore, the expected value model which maximizes the expected discounted net return from the project is developed. The stochastic simulation is designed to estimate the value of the objective function, and the simultaneous perturbation stochastic approximation (SPSA) algorithm is employed to solve the proposed model. At the end of this paper, a numerical example is presented to illustrate the effectiveness of this method.