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This article combines a real options approach to the optimal timing of outsourcing decisions with a linear programming technique for solving one-dimensional optimal stopping problems. We adopt a partial outsourcing model proposed by Y. Moon (2010) which assumes profit flows to follow a geometric Brownian motion and explicitly takes into account the benets and costs of all eorts which a firm spends on the project prior to the outsourcing date. The problem of deciding when to outsource and how much...
We analyze the optimal sales process of a stochastic advertising and pricing model with constant demand elasticities. We derive explicit formulae of the densities of the (optimal) sales times and (optimal) prices when a fixed finite number of units of a product are to be sold during a finite sales period or an infinite one. Furthermore, for any time t the exact distribution of the inventory, i.e. the number of unsold items, at t is determined and will be expressed in terms of elementary functions....
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