Optimal Strategies for Divestiture

Abstract

This paper examines a class of optional stopping problems in the context of the divestiture of an asset by a business or an individual. It first describes and analyzes a simple version of the problem, and then considers various generalizations, which are reduced to modified versions of the original problem. Next, it examines a heuristic procedure for obtaining approximate solutions, together with an analysis of the sensitivity of the criterion to a nonoptimal decision rule. Finally, it discusses the effect of a nonstationary environment on the divestiture strategy.