The problem of financing risky R&D projects over time has been stated as an optimal control problem by Hess [Hess, S. W. 1962. A dynamic approach to R&D budgeting and project selection. IRE Transactions on Engineering Management EM-9 (December) 170–178.], Lucas [Lucas, Robert E. 1971. Optimal management of a research and development project. Management Sci. 17 (11, July) 679–697.], and Kamien and Schwartz [Kamien, M. I., N. L. Schwartz. 1971. Expenditure patterns for risky R&D projects. J. Appl. Probab. VIII (1, March) 60–72.]. In this paper, the model is extended to allow the possibility of time dependent returns. The authors restate the problem as a finite horizon continuous time dynamic programming problem, and demonstrate uniform convergence to a unique, autonomous (infinite horizon) solution for the present value of the project and optimal spending rate as a function of expended effort. Further conclusions are shown for the time dependent model with exponential completion probability and for the time independent model.
No takes yet. Share an insight, caveat, or question.
Aldrich et al. (1975) studied this question.
Synapse has enriched 4 closely related papers on similar clinical questions. Consider them for comparative context: