2025/07/21 by Oliveros, Santiago
#FOS: Economics and business #Theoretical Economics (econ.TH)
paper · doi:10.48550/arxiv.2507.15438
We introduce a dynamic model in which a developer incrementally improves a product of uncertain quality over time, with the quality evolving as a controlled Brownian motion. At each moment in time, the developer can continue exploring by paying a flow cost, restart from a previously attained quality level by paying a fixed cost, or terminate the process by either freely abandoning the project or by incurring a cost to launch the highest quality observed so far. The optimal strategy is characterized by a free boundary of an impulse-controlled Brownian motion.