Gittins Indices and Oil Exploration
L. Benkherouf, K. D. Glazebrook, R. W. Owen
Journal of the Royal Statistical Society: Series B (Statistical Methodology) · 1992 · Volume 54 · Issue 1
DOI: 10.1111/j.2517-6161.1992.tb01877.x
Abstract
An earlier study by Benkherouf and Bather considered the question of when the results of oil exploration in a single area were sufficiently discouraging to render it optimal to stop drilling altogether. This stopping problem is now considerably elaborated by the inclusion of a choice between several areas in which to explore. Our oil exploration problem is modelled as a Bayesian sequential decision problem with a Markovian structure. Optimal drilling strategies are determined by Gittins indices. These indices also play an important part in the evaluation of heuristics.
Keywords
euler and heine prior distributions, gittins index, markov decision process, strategy evaluation
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