This article was downloaded by: [136.152.143.

23] On: 13 August 2018, At: 17:43

Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
INFORMS is located in Maryland, USA

Operations Research
Publication details, including instructions for authors and subscription information:
http://pubsonline.informs.org

When to Abandon a Research Project and Search for a

New One
Kevin F. McCardle, Ilia Tsetlin, Robert L. Winkler

To cite this article:

Kevin F. McCardle, Ilia Tsetlin, Robert L. Winkler (2018) When to Abandon a Research Project and Search for a New One.
Operations Research 66(3):799-813. https://doi.org/10.1287/opre.2017.1701

Full terms and conditions of use: http://pubsonline.informs.org/page/terms-and-conditions

This article may be used only for the purposes of research, teaching, and/or private study. Commercial use
or systematic downloading (by robots or other automatic processes) is prohibited without explicit Publisher
approval, unless otherwise noted. For more information, contact permissions@informs.org.

The Publisher does not warrant or guarantee the article’s accuracy, completeness, merchantability, fitness
for a particular purpose, or non-infringement. Descriptions of, or references to, products or publications, or
inclusion of an advertisement in this article, neither constitutes nor implies a guarantee, endorsement, or
support of claims made of that product, publication, or service.

Copyright © 2018, INFORMS

Please scroll down for article—it is on subsequent pages

INFORMS is the largest professional society in the world for professionals in the fields of operations research, management
science, and analytics.
For more information on INFORMS, its publications, membership, or meetings visit http://www.informs.org
 OPERATIONS RESEARCH
Vol. 66, No. 3, May–June 2018, pp. 799–813
http://pubsonline.informs.org/journal/opre/ ISSN 0030-364X (print), ISSN 1526-5463 (online)

METHODS

When to Abandon a Research Project and Search for a New One

Kevin F. McCardle,a Ilia Tsetlin,b Robert L. Winklerc
a UCLA Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095; b INSEAD Singapore,
Singapore 138676; c Fuqua School of Business, Duke University, Durham, North Carolina 27708
Contact: kmccardl@anderson.ucla.edu, http://orcid.org/0000-0001-6141-5689 (KFM); ilia.tsetlin@insead.edu,
http://orcid.org/0000-0002-7367-9494 (IT); rwinkler@duke.edu, http://orcid.org/0000-0002-1051-6639 (RLW)

Received: February 24, 2016
Revised: May 23, 2016; March 24, 2017;
August 3, 2017
Accepted: October 5, 2017
Published Online in Articles in Advance:
May 23, 2018
Subject Classifications: dynamic programming:
application, Bayesian; decision analysis:
sequential
Area of Review: Decision Analysis
https://doi.org/10.1287/opre.2017.1701
Abstract. We investigate the cost of the opportunity delayed by working on one project
with uncertain success rather than searching for a new project. We answer this ques-
tion: How long should a firm work on a research project with uncertain success before
abandoning it if the only alternative is to search for a new project to work on? Rather
than treating the opportunity as an exogenous alternative, this approach endogenizes the
opportunity value and the attendant cost of its delay. We consider cases with both a finite
and an infinite number of potential projects. We derive the optimal stopping time and
show that it increases with the discount rate, with the rate of arrival of project failure,
and with the prior probability that the project can be successfully completed. The optimal
stopping time decreases with the rates of new project arrival and project completion.

Copyright: © 2018 INFORMS

Keywords: project management • dynamic programming • uncertainty • Bayesian updating • optimal stopping • exponential Poisson bandit

1. Introduction The decision to abandon a project is very important

After a three-year effort, Merck announced in March 2012
that, based on the “projected development timeline,” it was
abandoning an oral formulation of vernakalant, a drug for the
prevention of atrial fibrillation. (O’Riordan 2012)
In late July 2015, the European Medicines Agency approved
the sale of Mosquirix, an anti-malarial vaccine developed by
GlaxoSmithKline. The vaccine had been in development at
Glaxo for over 30 years: Moncef Slaoui, head of Glaxo’s vac-
cine division, had worked on it for 27 years. (Lorenzetti 2015)
A researcher can spend her time in one of two activ-
ities: working on an existing research project or gen-
erating an idea for a new research project. There is
some prior probability that the existing research project
can be successfully completed if it is being worked on;
the updated probability of successful completion varies
over time as the project is worked on and either success
or failure does not arrive. If the arrival rate of success is
greater than the arrival rate of failure, then the updated
probability of successful completion declines over time;
if the arrival rate of success is less than the arrival rate of
failure, then the updated probability of successful com-
pletion increases over time. If the researcher is not work-
ing on a project, she can search for new ideas (i.e., poten-
tial new projects). Questions addressed in this paper
include, what is the opportunity cost of not generating
new ideas while the researcher is working on an exist-
ing project? And how long should a researcher work on
a project before giving it up and returning to generating
new ideas: 3 years, as in the case of vernakalant, or more
than 30 years, as in the case of Mosquirix?
799
and difficult. Some attention has been given to exit deci-
sions for ailing business ventures (e.g., Staw and Ross
1987, Horn et al. 2006, Elfenbein and Knott 2015); the
key finding is that companies tend to stick with a fail-
ing venture too long. Several explanations are posited
for this inertia, including status quo bias, the sunk-
cost fallacy, escalation of commitment, confirmation
bias, and unwillingness to admit failure. Elfenbein and
Knott (2015, p. 974) conclude that since their evidence
“suggests there is considerable exit beyond the opti-
mum, firms could likely benefit from automated deci-
sion rules . . . in making exit decisions . . . While firms
could choose to override the exit rule, having the rule
would implicitly make exit the default, rather than the
current practice of continuation as the default.” Ryan
and Lippman (2005) develop a model to determine the
optimal exit time from a deteriorating project.
The decision to abandon a research project shares the
conditions that make it hard to exit an ailing business,
in addition to other considerations that can make the
abandonment decision even more difficult. With ail-
ing business ventures, very concrete information that
is easily understandable to decision makers is regu-
larly available through statistical signaling, e.g., declin-
ing market share and decreasing profits or increas-
ing losses. Information about progress on a research
project, to the extent that it exists, is often much more
vague and opaque to the decision maker, often consist-
ing primarily of progress reports. Those reports come
from the researchers themselves, who have a vested
 McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
800
interest in having the project continue and therefore
may tend to paint an overly rosy picture. Typically, “the
project manager knows more about the quality of the
idea than the senior executives that do the screening”
and “the project manager’s development effort is not
entirely observable by senior executives.” (Chao et al.
2014, p. 1286). The decision maker often does not have
sufficient expertise to be able to verify the information
in the progress reports. Thus, we feel it is important to
derive a prescriptive model for the situation in which
there is no information about the project progress. This
is the focus of our paper.
There is a large literature on whether to start and
when to stop investing time and effort on a research
project, as well as what the optimal path of implement-
ing/investing in it is (see, e.g., the study by Childs
and Triantis 1999, which takes a contingent claims ap-
proach, and the references therein). And there are con-
sulting firms and managerial processes such as Stage-
Gate (Cooper and Edgett 2015) that assist firms in the
task of dropping unsuccessful projects. These decisions
depend on the project characteristics (such as the prob-
ability that the project can be successfully completed,
the rate at which success arrives if it is possible, the
fixed amount of time that must be spent before suc-
cess is possible, and the payoff if the project is success-
fully completed) and on the opportunity cost (what
the decision maker could earn instead of continuing
the project at hand). In that literature, the opportu-
nity cost is mostly exogenous (often zero), and it seems
that in many instances determining this opportunity
cost would be quite challenging. The idea of our paper
is to make opportunity cost somewhat endogenous,
in the sense that if the current project is abandoned,
the only option is to search for similar projects. We
study this problem through a variety of continuous-
time models: single projects versus multiple projects
versus an infinity of projects, single rewards versus
multiple rewards, and risk neutral versus risk averse.
One purpose of studying the various approaches is to
explore the robustness of the results.
Our focus is on processes in which time and effort are
the major inputs, or where the flow rate of effort and
expenditures while carrying out the research is nearly
constant; the only information the firm has is that nei-
ther success nor failure has arrived—until one or the
other does. Processes that fit this description include
the early stage of pharmaceutical discovery or oil and
gas exploration, academic research, and new prod-
uct development. More broadly, our model applies to
any search activity that involves identifying potential
opportunities (e.g., prospective suppliers or business
partners) and then closing the deal. We build a sim-
ple model of such processes and derive expressions
for the optimal abandonment time that could be used
as automated decision rules. We provide comparative
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS
statics on the abandonment time: for example, we find
that the optimal stopping time is relatively insensitive
to changes in the prior probability of success, except
when that probability is quite large. On the other hand,
the optimal stopping time is relatively sensitive to
changes in the arrival rate of new projects, the arrival
rate of successful project completion, and the arrival
rate of project dead ends.
Our contributions are twofold. Perhaps most impor-
tant, because our model is parsimonious and our
assumptions on the parameters of the model fairly gen-
eral, we are able to give prescriptive advice in situa-
tions with relatively little information. For instance, if
the probability of successful completion of a project is
small (as it is in most research settings), then the rule
for optimal stopping (see Equation (18)) requires know-
ing only the rates at which successful completion and
failure normally arrive and the rate at which potential
new projects are generated. Because we focus on pro-
cesses in which these rates can be assumed to be con-
stant, there is no interim information on the project’s
progress except for the Poisson arrival of success or
failure. To the best of our knowledge, ours is the first
paper to provide this prescriptive advice absent infor-
mation about opportunity cost and some measure of
the progress of the research project. In large part this is
because in our model, the opportunity cost is endoge-
nous. We also provide closed-form results for other
situations—ones in which, for instance, the number of
available projects is limited or the decision maker is
risk averse. Our second major contribution is method-
ological: we are able to solve for the value function and
optimal policies, again under fairly general conditions.
Our closed-form solutions are more detailed than in
earlier papers; explicit comparisons will be made as
appropriate in the next section.
The rest of this paper is organized as follows. We
begin in the next section with a brief literature review.
In Section 3, we develop a parsimonious model with an
exogenously specified opportunity value. We start by
assuming that there is only one available project and
then extend to a finite number of projects, all of which
could prove successful and beneficial. As long as there
are projects remaining, the choice in each instance is
between working on the project at hand or abandoning
it and searching for a new project. If the latter action
is chosen, we assume that new projects are generated
following a Poisson process. We characterize the value
function and the optimal policy. For instance, we show
that the optimal abandonment time is decreasing in the
number of projects remaining. In Section 4, we endo-
genize the opportunity value by considering the lim-
iting case of an infinite number of available projects.
We characterize the value function and determine the
optimal stationary policy. The special case in which
only one reward can be earned (though there are an
McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS
infinite number of available projects) is considered in
Section 4.1. We show that the optimal abandonment
time is identical to the case in which an unlimited
number of rewards can be earned. Other variations of
the problem (for instance, allowing recall of previously
abandoned projects) and comparative statics are pro-
vided in the remainder of Section 4. We conclude in
Section 5.
2. Literature Review
Our paper is related to the vast literature on research
and development (R&D) and technology adoption,
which in itself is related to the multiarmed bandit lit-
erature. First, we provide a brief review of the research
on multiarmed bandits, and then we restrict our atten-
tion to only a handful of the R&D papers most closely
related to the current paper.
There is extensive literature on multiarmed ban-
dits (see Berry and Fristedt 1985 for a primer on dis-
crete time and Mandelbaum 1987 for continuous time).
In the simplest case, the bandit has two arms, one risky
and one safe. The safe arm returns the same amount, S,
each time it is pulled. The risky arm returns the amount
R or 0. There is a chance that the risky arm is no
good—it will only produce 0. The firm starts with a
prior belief regarding the probability that the risky
arm is good (produces R with positive probability each
period according to some distribution). Once a value
of R is observed, the firm knows that the risky arm
is good and will continue to pull that arm exclusively
(assuming R is sufficiently larger than S). For example,
in Negoescu et al. (2017), the arms represent drugs for
the treatment of a chronic disease, the safe one hav-
ing a known efficacy and the risky one unknown. If
the prior belief regarding the risky arm is above some
threshold, the firm (doctor or patient) pulls the risky
arm; otherwise, the safe arm is pulled.
In more general settings, there can be more than two
arms (k-armed bandits, with k − 1 risky arms), and the
values generated by the risky arms can be random vari-
ables, perhaps different across the arms. The essential
theorem establishes the existence of an index (Gittins
1979) for each arm. The index serves to rank order the
arms. If a risky arm is pulled and returns a value of R,
the index increases; if it returns a value of 0, the index
decreases. In the two-arm case, bang-bang solutions
are obtained: once the safe arm is pulled, it is pulled
exclusively; if the firm starts by pulling the risky arm, it
continues to do so until the risky index falls below the
index of the safe arm, and then the safe arm is pulled
thereafter. In the multiarm case, at each step, the arm
with the largest index is pulled, and again, once the
safe arm is pulled, it is pulled exclusively.
The bandit problem has been extended in a myriad
of ways, most recently to competitive, continuous-time,
multiarmed models (Bolton and Harris 1999, Keller
801
et al. 2005). In continuous time there could be intervals
for which both arms are pulled, and in the competi-
tive models, there are instances in which firms trade
off pulling the risky arm.
The parallels of the two-armed bandit with our sim-
plest model with only one research project, as detailed
in Section 3.1, are clear. The firm can either work on
the research project (pull the risky arm), or choose
the alternative represented by the opportunity value
(pull the safe arm). The Bayesian evolution of beliefs
regarding whether or not the risky arm is good in an
exponential/Poisson bandit problem (see, e.g., Keller
et al. 2005) is identical to the evolution of beliefs in our
model, once adjusted for parameterization of the mod-
els. Thus, our setting with a single available project is
a special case of the models considered in Keller et al.
(2005) and Keller and Rady (2015); beyond that, our
focus is on the choice between continuing to explore a
risky arm and searching for a new arm. So our model
would not be a good representation of drug treatment
for a chronic disease as in Negoescu et al. (2017); rather,
we see it as representative of the process of bringing
new drugs to market.
Turning to the literature on R&D, McCardle (1985)
develops a dynamic-programming model of technol-
ogy adoption: in each period a firm can either exper-
iment with (gather information about) a technology
of uncertain value, adopt the technology, or reject the
technology. As the firm gathers information about
the possible success of the technology, it updates its
prior beliefs using Bayes rule. Eventually, the firm has
enough information (its posterior distribution has low
enough variance) that it can make an adopt or reject
decision. If the firm rejects the technology, it earns 0
and the problem comes to an end. The optimal pol-
icy is cone shaped: if the current belief is inside the
cone, the firm continues to experiment, moving to
the right in the cone (positive results move the belief
upward, and negative results move the belief down-
ward); if the belief exits the cone on the upper side,
the firm stops experimenting and adopts the technol-
ogy; and if the belief exits the cone on the lower side,
the firm stops experimenting and quits. This work was
extended to general distributions by Ulu and Smith
(2009) and Smith and Ulu (2012) and to allow risk
aversion by Smith and Ulu (2015). Rather than having
a two-dimensional state space (mean and precision),
more general probability distributions are allowed.
In a set of clever papers, Alizamir et al. (2013, 2014)
model a related problem (diagnostic testing of patients
in a queue) in which additional information is gath-
ered; that is, another test performed, or the patient is
sent home or remanded for treatment. Their model has
the added complication of congestion. Rather than a
cone-shaped optimal policy, they establish the optimal-
ity of an M-shaped policy. The inverted cone of the “M”
is a result of the congestion.
 McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
802
Kornish and Keeney (2008) consider information
acquisition in the context of designing a flu vaccine.
This is a decision-making situation with a deadline and
with a finite number of alternatives among which to
choose.
The closest antecedent to our paper is the discrete-
time model of Lippman and McCardle (1991), which
allows for repeated search: if the firm rejects one tech-
nology, it returns to the pool of available technologies
and draws again. They establish generic results regard-
ing the monotonicity and convexity of the value func-
tion and characterize the optimal policy for probability
distributions satisfying certain Bayesian updating con-
ditions. In the current paper, we are able to establish
considerably tighter analytic results and more explicit
computational results by imposing slightly stronger
conditions in a continuous-time model. Our model is
sufficiently different in that our results are not an exten-
sion of theirs. For example, while they show that an
optimal policy exists and is cone shaped, we are able to
explicitly solve for and characterize the optimal aban-
donment time (see Equation (18) and the companion
Figure 3) knowing only the prior probability of suc-
cessful project completion, the rates at which success
and failure conditionally arrive, and the rate at which
a new project can be found.
3. Setting the Stage: Exogenous
Opportunity Cost
We begin with a simple, infinite-horizon, continuous-
time model with only one available project and an
assumption that the opportunity cost is exogenously
specified. The current time period corresponds to t  0.
The instantaneous discount rate is e −δt for some fixed
δ > 0.
A risk-neutral decision maker has before her a risky
research project to which she could devote her time
and effort. Successful completion of the project, if pos-
sible, arrives exponentially at rate λ s . The probability
that the project is completed by time t, given that it can
be successfully completed, is 1 − e −λ s t . However, there
is a chance that any effort devoted to the project will
be fruitless—the project could be impossible or infeasi-
ble to complete. For instance, the researcher might not
have the necessary experience, she might discover a
counterexample to a primary theorem, or she might be
beaten to the solution by a competitor. If the project is
undertaken and at some point is found to be fruitless,
we say that failure has arrived. Failure, if the project
is not possible to complete, arrives exponentially at
rate λ f . (We will not formally develop an equilibrium
model of competition.)
There is a minimum time ∆ that must be spent work-
ing on the project before completion is even possible.
This is meant to capture the fixed costs of the project,
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS
such as time spent outfitting a laboratory or recruiting
subjects for a study—or, in the case of a Ph.D. stu-
dent, the time spent searching the literature. Alterna-
tively, ∆ can be thought of as the switching cost/time
of transitioning from idea generation to idea execu-
tion. No information, positive or negative, arrives dur-
ing ∆. That is, if the project is undertaken, first, one
has to work on it for an amount of time ∆; thereafter, if
the project can be successfully completed, completion
arrives at rate λ s ; and if failure is preordained, it arrives
at rate λ f . The project pays reward R > 0 if and when it
is successfully completed. (Our results do not change
if the rewards have a distribution and R is interpreted
as an expected value.)
There is an available nonproject activity yielding a
deterministic cash flow that the decision maker could
earn if she works on that in lieu of working on the
project. Denote by π the net present value at time 0
of the future cash flows from the nonproject activity;
that is, if she chooses not to begin work on the project,
π is earned from the nonproject activity. By stationar-
ity, the net present value of future cash flows from the
nonproject activity if it is begun at some later time t
is πe −δt . Given the discount rate e −δ and the nonproject
activity value π, the opportunity cost of a one-period
delay of the nonproject activity is π(1 − e −δ ). For exam-
ple, if time is measured discretely and the nonproject
activity yields an annuity that pays α per period, then
π is given by α/(1 − e −δ ), and the opportunity cost of a
one-period delay is π(1 − e −δ )  α.
3.1. Abandoning the Project Once Started
Suppose the decision maker has started work on the
risky project. Because we assume that a project once
abandoned cannot be restarted (although we relax this
assumption later in Section 4.2), the question before the
decision maker is when, if ever, to abandon work on the
project and divert all her effort to the outside activity.
Let ∆ + t be the abandonment time. Note that because
there is no chance that the project can be completed
prior to ∆, it cannot be optimal to abandon the project
prior to ∆ if it was beneficial to start. The expected
value at time 0 of the current project to the researcher
if the plan is to abandon at ∆ + t is given by
∫ t ∫ t
v(t)  p (R + π)e −δ(∆+z) λ s e −λ s z dz + (1 − p) πe −δ(∆+z)
0 0
· λ f e −λ f z dz + (pe −λ s t + (1 − p)e −λ f t )πe −δ(∆+t)
 p(R + π) λ s (1 − e −(λ s +δ)t )
 
λs + δ

 
λf
 
 e −δ∆  −(λ f +δ)t  . (1)
 
 + (1 − p)π (1 − e )
 λf +δ 
+ (pe −λ s t + (1 − p)e −λ f t )πe −δt 
 


McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS 803

The first term on the right-hand side of the first line of To find the optimal abandonment time t ∗ , differenti-
(1) represents the expected value if the project is suc- ate v(t) in (1) with respect to t yielding
cessfully completed before time ∆ + t; the prior prob- dv(t)
ability of successful completion is p; and the return ∝ p(R + π)λ s e −(λ s +δ)t + (1 − p)πλ f e −(λ f +δ)t
dt
on completion is the reward to the project R plus
− π[(1 − p)(λ f + δ)e −(λ f +δ)t + p(λ s + δ)e −(λ s +δ)t )]
the value of the outside activity π, appropriately dis-
counted for the arrival time before ∆ + t. Note that ∝ p(R + π)λ s e −(λ s −λ f )t + (1 − p)πλ f
once the researcher successfully completes the project − π[(1 − p)(λ f + δ) + p(λ s + δ)e −(λ s −λ f )t ]
and earns R, she immediately turns her attention and
 pRλ s e −(λ s −λ f )t − πδ(1 − p + pe −(λ s −λ f )t )
efforts to the outside activity and earns the present
value π. δ
∝ p(t)R − π . (3)
The second term on the right-hand side of the first λs
line of (1) represents the expected value if the project When pRλ s > πδ (which we assume henceforth),
fails before ∆ + t. Again, once the project fails (in which attempting to set the derivative in (3) equal to 0
case the researcher earns 0), she immediately turns her and solving yields a finite solution for the optimal
attention and efforts to the outside activity. abandonment time when λ s > λ f and yields infinity
The term in the second line of (1) represents the otherwise:
expected payoff if the project is neither successfully 1

1−p πδ

if λ s > λ f ,

completed nor ended by failure by time ∆ + t, and it is − ln


λs − λ f p Rλ s − πδ


then abandoned. This happens with prior probability t∗  (4)
(pe −λ s t + (1 − p)e −λ f t ). The researcher then turns to the

∞

otherwise.
nonproject activity and earns π. For example, suppose

a firm has a product it can produce and sell, earning If λ s < λ f , the posterior probability of success p(t)
π in net present value; or the firm could attempt to is increasing in t, so it is never optimal to stop once
started. Note that (4) equates the posterior probabil-
develop an improved product that would earn R + π in
ity of successfully completing the project and receiving
net present value, if the improvement can be success-
the associated reward R with the cost of the delay in
fully completed. How long, if at all, should the firm
receiving the sure π.
pursue the product improvement? And what is the
expected value of pursuing the improvement project? Lemma 2. For λ s > λ f , the optimal abandonment time,
∆ + t ∗ , decreases with the opportunity value π and the dis-
Lemma 1. The expected value of the project v(t) is bounded count rate δ, and it increases with the prior probability of
above by R + π. It is increasing in the prior p, the reward R, successful completion p, the reward from successful com-
and the opportunity value π; it is decreasing in the fixed pletion R, and the arrival of failure rate λ f . For λ f  0,
cost ∆ and the discount rate δ. the optimal abandonment time is increasing (decreasing) for
Proof. The firm earns R + π if there are no fixed costs,
small (large) values of λ s .
∆  0; no time discounting, δ  1; and if the research is Proof. The assertions regarding π, δ, p, R, and λ f fol-
successful. Differentiating v(t) with respect to ∆ and δ low on taking the appropriate derivatives of t ∗ 
establishes that v(t) is decreasing in both. Hence, R + π −(1/(λ s − λ f )) ln[((1 − p)/p)(πδ/(Rλ s − πδ))].
is an upper bound. Differentiating v(t) with respect To establish the result for λ s , set λ f  0 and denote
to p and R completes the proof.  p(t, λ s )  pe −λ s t /(1 − p(1 − e −λ s t )). The optimal stopping
time t ∗ is given by equation λ s p(t ∗ , λ s ) πδ/R. There-
Let p(t) represent the posterior probability at time fore,
∆ + t that the project can be successfully completed dt ∗ (∂/∂λ s )(λ s p(t, λ s ))
given that it has been worked on for ∆ + t without − .
dλ s (∂/∂t)(λ s p(t, λ s ))
success. Then p(t) is given by
As (∂/∂t)(λ s p(t, λ s )) < 0, dt ∗ /dλ s has the same sign as
pe −λ s t pe −(λ s −λ f )t (∂/∂λ s )(λ s p(t, λ s )). Observe that
p(t)   . (2)
pe −λ s t + (1 − p)e ∂ ∂ pe −λ s t
 
−λ f t
pe −(λ s −λ f )t
+ (1 − p)
(λ s p(t, λ s ))  λs
∂λ s ∂λ s 1 − p(1 − e −λ s t )
From (2) we see that the probability that the project −tλ s
e
can be successfully completed given that neither suc- p (pe −tλ s − tλ s − p + ptλ s + 1).
cess nor failure has arrived by t after ∆ is increasing (pe s − p + 1)2
−tλ

(decreasing) in t if the rate of successful arrival is less Therefore, (∂/∂λ s )(λ s p(t ∗ , λ s )) has the same sign as
than (greater than) the rate of failure arrival: λ s < λ f pe −t λ s − t ∗ λ s − p + pt ∗ λ s + 1  pe −t λ s + (1 − p)(1 − λ s t ∗ ),
∗ ∗

(λ s > λ f ). The posterior probability at time t that the which is positive (negative) if (λ s t ∗ − 1)e λ s t < (>)
∗

project cannot be completed is just 1 − p(t). p/(1 − p). 

 McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
804 Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS

Alternatively, we can characterize the optimal deci-
sion by considering the posterior probability p(t).
Because p(t) is monotonically decreasing for λ s > λ f ,
p(t ∗ )  πδ/Rλ s represents the threshold probability at
which the firm should abandon the project. As the for-
mula for p(t) does not involve R, π, or δ, it is much
easier to establish several of the assertions of Lemma 2:
the firm should abandon the project when the poste-
rior probability of success falls below p(t ∗ ), and p(t ∗ ) is
increasing in π and δ and decreasing in R.
It is worth noting that because our model is rel-
atively simple, controlled as it is by two exponen-
tial/Poisson processes, the Bellman equation has an
analytically exact solution with a clear interpretation:
continue researching a project until the instantaneous
expected benefit, p(t)λ s R, falls below the discounted
opportunity value, πδ. Analytic solutions generally do
not obtain in more complicated models; there numeri-
cal methods are used to approximate the dynamic pro-
gramming value function and the optimal policy.
The only remaining question is whether or not the
researcher should begin work on the project, and the
answer is obvious: if v(t ∗ ) > π, start work; otherwise,
do not. Observe that for ∆  0 and λ s > λ f this reduces
to the condition pRλ s > πδ.
successfully completed, failed, or abandoned, the firm
searches for a new project as long as there are projects
remaining.
Let π k for k 6 n be the value of searching for a new
project when there are k projects remaining that have
not been investigated and have not been either success-
fully completed, failed, or abandoned. Without loss of
generality, fix π0 ; π0 represents the same value as π
in the single project case, so, as in the previous sec-
tion, any small positive value will do. Let v k (t) be the
expected value when the firm has begun investigation
of the kth remaining project, and it plans to abandon
the project if success is not achieved or failure has not
arrived by time ∆ + t. We now set up an interleaved
set of recursions: one for v k (t), suitably optimized, and
one for π k .
Begin by letting v1 (t)  v(t) as given in (1), substi-
tuting π0 for π. Denote the optimal abandonment time
by t1∗ . Let v1  v1 (t1∗ ) be the optimal value of working on
the last remaining project. Now let π1 be the value of
searching for the last remaining project:
∫ ∞
λ0
π1  λ 0 e −λ0 x e −δx v1 dx  v .
λ0 + δ 1
0

Iteratively define v 2 (t), v 2 (t2∗ ), π2 , v3 (t), v3 (t3∗ ), π3 , . . . .

3.2. A Finite Number of Potential Projects
Then v k (t) represents the value of starting work on the
In the previous section, we set the stage by consider-
kth project when the plan is to abandon it at time ∆ + t
ing a model with only one project and an exogenous
if it has not been successfully completed prior to that
opportunity, characterized by the value π of the alter-
time or failure has not arrived prior to that time:
native. In this section we begin to make the opportu-
nity endogenous by assuming that if the firm aban-
 p(R + π k−1 ) λ s (1 − e −(λ s +δ)t )
 
dons the research project at hand, it will search for a
λ + δ

 s

new project to work on. To focus on projects with finite
λf
 
v k (t)  e −δ∆ 
. (5)

abandonment times, we assume that the arrival rate  + (1 − p)π (1 − e −(λ f +δ)t ) 
k−1
λ + δ

for success is greater than the arrival rate for failure:  f 
λ s > λ f . There are a finite number n of ex ante identical  + (pe −λ s t + (1 − p)e −λ f t )π k−1 e −δt 
 
projects available. (Section 3.1 corresponds to the case
 
n  1.) Imagine, for example, searching for a supplier As in the previous case, optimize (5) by differentiating
among a finite number of potential suppliers; here, suc- and solving for t k∗ :
cessful completion would be closing a deal and hav-
ing the supplier successfully deliver the needed part. π k−1 δ
 
1 1−p
While the firm engages in search, a new project arrives t k∗ − ln . (6)
λs − λ f p Rλ s − π k−1 δ
exponentially at rate λ 0 . (If λ 0  ∞, new projects arrive
instantaneously; this is equivalent to the case in which The optimal payoff at the start of the kth project is
the firm has the research projects already in hand.) As v k  v k (t k∗ ):
long as the exogenous opportunity value when there is
only one project remaining is positive, a finite number
 p(R + π k−1 ) λ s (1 − e −(λ s +δ)tk∗ )
 
of potential projects is tantamount to a finite horizon  λs + δ


because in a finite amount of time the firm will finish 
λf

v k  v k (t k∗ )  e −δ∆  −(λ f +δ)t k∗  .
 
with all of the available research projects and then turn + (1 − p)π (1 − e )
to the outside activity and earn π. (In the next section
k−1
λf +δ
 
 
∗ ∗ ∗
 + (pe −λ s tk + (1 − p)e −λ f tk )π k−1 e −δtk 
 
we let the number of projects—hence the horizon—  
recede to infinity.)
Each time the firm successfully completes a project, As shown in the appendix, substituting in the value
it earns R suitably discounted. Once a project is of t k∗ from (6) and simplifying yields v k as a function of
McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS 805

π k−1 alone; that is, without t k∗ , in k. The value function π k is monotonically increasing in k,
it is increasing in the prior p and the reward R, and it is
λf 
 p(R + π ) λ s + (1 − p)π decreasing in the discount rate δ and the fixed cost ∆.


 k−1
λs + δ k−1
λ f + δ 
Proof. A bound on the value function is given by

π k−1 δ(λ s − λ f )
 
pR(λ s /δ) + π0 . To establish that π k is increasing in k,
 +(1 − p) (λ f + δ)(λ s + δ)
 
vk  e −δ∆   . (7)


 note that the firm could immediately abandon the kth
 
π k−1 δ
 (λ f +δ)/(λ s −λ f )  project and earn π k−1 ; behaving optimally must earn
 · 1−p
 
 more than that. The comparative statics with regard to
p Rλ − π δ
p, R, δ, and ∆ are established through a straightforward
 
 s k−1 
Finally, let π k be the value of searching for the kth-to- recursion following Lemma 1. 
last remaining project:
As in the single-project case, the remaining question
∞
λ0 is whether or not to start research. The condition is the
∫
πk  λ0 e −λ0 x e −δx v k dx 
vk same: if the value of the research process is greater than
0 λ 0+δ
λf the return to the outside option, v k (t ∗ ) > π k−1 , start the
 p(R + π ) λ s +(1− p)π
 
 research program. Also, as in the single-firm case, this


k−1
λs + δ k−1
λf +δ 
 condition reduces to pRλ s > π0 δ. The proof follows a
λ 0 −δ∆  π k−1 δ(λ s − λ f )
 
recursion argument.
+(1− p)

 e ,
λ0 + δ 
 (λ f + δ)(λ s + δ) 
 Corollary 1. The optimal abandonment time t k∗ is decreas-
 (λ f +δ)/(λ s −λ f )
π k−1 δ ing in k.
  
 1− p 
 · 

 p Rλ s − π k−1 δ 
 Proof. The claim follows immediately from Proposi-
(8) tion 1 and Lemma 2. 
which gives π k as a function of π k−1 . Figure 1 dis- Read another way, Corollary 1 says that the fewer
plays π k as a function of k for various values of the the number of projects remaining to be investigated,
prior probability of success p with λ s  1, λ f  0, λ0  2, the more time the firm should spend on each one prior
δ  0.1, ∆  0, R  1, and π0  0. From the figure we see to abandoning it. The fewer the number of projects
that π k appears to be bounded, concave, and increas- remaining, the lower the opportunity value foregone
ing in k; it also appears to be increasing in p. The next by working on the project at hand, and the longer the
proposition establishes these observations and several firm should continue to work. Figure 2 displays t k∗ as a
others. function of k for different values of p with other param-
eters as in Figure 1.
Proposition 1. At each project stage, the optimization is
The foregoing material assumed that the arrival rate
well defined. The value function π k is bounded uniformly
of success is greater than the arrival rate of failure,
λ s > λ f . If the opposite is true, λ s < λ f , then failure
Figure 1. (Color online) Graph of π k as a Function of k for arrives more quickly than success, and in this case, no
Different Values of p news is good news: the fact that neither failure nor
6
p = 0.9 p = 0.7 p = 0.5
p = 0.3 p = 0.1 Figure 2. (Color online) Graph of t k∗ as a Function of k for
5 Different Values of p
3.5
4 p = 0.9 p = 0.7 p = 0.5
3.0
p = 0.3 p = 0.1

πk 3 2.5

2.0
t*k
2 1.5

1.0
1
0.5

0 0
0 5 10 15 20 25 30 35 40 0 5 10 15 20 25 30 35 40
k k
Note. Other parameters are λ s  1, λ f  0, λ0  2, δ  0.1, ∆  0, R  1, Note. Other parameters are λ s  1, λ f  0, λ 0  2, δ  0.1, ∆  0, R  1,
and π0  0. and π0  0.
 McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
806 Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS

success has arrived by time t increases the probability Alternatively, rather than solving the fixed point
that the project will be a success; that is, p(t) is increas- equation for π (i.e., π not as a function of t ∗ ), one could
ing in t, and the optimal abandonment time t k∗  ∞. solve a fixed point for t ∗ . A fair bit of algebra (see the
With an infinite abandonment time, the value function appendix) leads to the following:
becomes
e −(λ f +δ)t
∗ ∗
e (λ s −λ f )t λs + δ

λs λf
 + 
vk  e −δ∆
p(R + π k−1 ) + (1 − p)π k−1 . λs − λ f (λ f + δ) δ(1 − p)(λ s − λ f )
λs + δ λf + δ λ + δ δ∆

λf

· 0 e − p − (1 − p) . (13)
The firm’s task is considerably easier: once work begins λ0 λf + δ
on a project, it continues until either success or fail- Proposition 2. The value function π∞ is well defined; it is
ure arrives. The manager never needs to intervene and the unique fixed point of (12), it is increasing in the prior p
cancel a project that is going nowhere. and the reward R, and it is decreasing in the discount rate δ
and the fixed cost ∆.
4. Endogenizing the Opportunity Value: An Proof. Proposition 1 establishes that π k is uniformly
Infinite Number of Potential Projects bounded in k and is monotonically increasing in k.
For the case with an infinite number of potential pro- Hence, by the monotone convergence theorem, π∞ 
jects, each of which if successful earns R, formally let limk→∞ π k is also bounded. The comparative statics are
k → ∞ in Equations (5) through (8). We need to confirm proved as before. 
the legitimacy of that formality. In this case v∞ (t) is the
value of starting work on a project when there are an Corollary 2. If λ s > λ f , the optimal abandonment time t ∗ is
infinite number of projects, and the plan is to abandon increasing in p, δ, ∆, and λ f ; it is decreasing in λ 0 and λ s ;
the current project at time ∆ + t and then to behave and it is unaffected by changes in R.
optimally thereafter: Proof. The left-hand side of (13), which defines the
optimal abandonment time, is increasing in t ∗ . Straight-
 p(R + π∞ ) λ s (1 − e −(λ s +δ)t ) forward differentiation shows that the right-hand side
 

 λs + δ 
of (13) is increasing in p and ∆, decreasing in λ 0 , and
λf
 
v∞ (t)  e −δ∆  −(λ f +δ)t  . (9) unaffected by changes in R, establishing the corollary
 
+ (1 − p)π (1 − e )
∞
λf + δ for those parameters.
 
 
 + (pe −λ s t + (1 − p)e −λ f t )π∞ e −δt 
  To establish the claim regarding λ s , define
δe (λ s −λ f )t + (λ s − λ f )(δ/(λ f + δ))e −(λ f +δ)t
 
Differentiating (9) with respect to the abandonment F(λ s , t) 
time t and setting it equal to 0 yields the optimal aban- λs + δ
λ 0 + δ δ∆ λf
∗
 
donment time t∞ : 1
− e − p − (1 − p) .
1−p λ0 λf + δ
π∞ δ
 
1 1− p
if λ s > λ f ,

− ln

Then Equation (13) is equivalent to F(λ s , t ∗ )  0, and

λs − λ f p Rλ s − π∞ δ

∗
t∞  (10)
 dt ∗ ∂F/∂λ s
∞ otherwise. − .

dλ s ∂F/∂t ∗

Finally, π∞ is the value of searching for the next project:
The denominator is positive: ∂F/∂t ∗  ((λ s − λ f )δ/
∞
λ0 (λ s + δ))(e (λ s −λ f )t − e −(λ f +δ)t ) > 0. It remains to show that
∫
π∞  λ 0 e −λ0 x e −δx v∞ (t∞
∗
) dx  v (t ∗ ). (11)
0 λ0 + δ ∞ ∞ the numerator is also positive:
If we let v(t)  v∞ (t), t ∗  t∞
∗
, and π  π∞ , then (δ/(λ f + δ))e −(λ f +δ)t + δte (λ s −λ f )t
∂F/∂λ s 
(9) and (10) with an infinite number of projects re- λs + δ
duce to (1) and (4) with an exogenous opportunity δe (λ s −λ f )t
+ (λ s − λ f )(δ/(λ f + δ))e −(λ f +δ)t
value π, with the added condition that π satisfy a −
fixed point equation derived by substituting in (11) and (λ s + δ)2
λs + δ λ s − λ f −(λ +δ)t
 
simplifying:
 δ −δ e f + δ(λ s + δ)
λf + δ λf + δ
λf 
 p(R + π) λ s + (1 − p)π
 
1

 λs + δ λ f + δ  · te (λ s −λ f )t
− δe (λ s −λ f )t
·
(λ s + δ)2

λ 0 −δ∆  πδ(λ s − λ f )
 
+ δe −δt + δ(λ s + δ)te λ s t − δe λ s t −λ f t

π e (1 − p)  . (12)
λ0 + δ  (λ f + δ)(λ s + δ)   e
 
 (λ f +δ)/(λ s −λ f )  (λ s + δ)2
πδ

δ

 · 1−p e (λ s −λ f )t (e −t(λ s +δ) + t(λ s + δ) − 1) > 0.
 
 

 p Rλ s − πδ 
 (λ s + δ)2
McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS 807

To establish the claim regarding λ f , similarly define First observe that as p → 1, t ∗ (p) → t ∗ (1)  ∞: as the
probability that the project can be successfully com-
λs + δ pleted approaches 1, the firm should spend more and
F(λ f , t)  (λ f + δ)e (λ s −λ f )t + (λ s − λ f )e −(λ f +δ)t −
δ(1 − p) more time on it. If the firm knows with certainty that

λ 0 + δ δ∆
  the project can be successfully completed (in which
· e − p (λ f + δ) − (1 − p)λ f case, it cannot fail), then the firm should work on
λ0
it until completion—assuming, of course, that it was
λs + δ
 (λ f + δ)e (λ s −λ f )t + (λ s − λ f )e −(λ f +δ)t − worth starting work on it in the first place.
δ(1 − p) Now consider the behavior of t ∗ (p) as p goes to 0.
λ 0 + δ δ∆ Formally define t ∗ (0)  limp→0 t ∗ (p). (Of course, if the
  
· e − 1 (λ f + δ) + (1 − p)δ
λ0 prior probability of successful completion is 0, the firm
 (λ f + δ)e (λ s −λ f )t + (λ s − λ f )e −(λ f +δ)t should not start work on the project, as pRλ s needs to
be strictly greater than πδ.) Because t ∗ (0) solves (14),
λ + δ λ 0 + δ δ∆
 
− s e − 1 (λ f + δ) − (λ s + δ). t ∗ (0) > 0. We interpret t ∗ (0) as the limiting abandon-
δ(1 − p) λ0 ment time as p gets very small.

Then Equation (13) is equivalent to F(λ f , t ∗ )  0, and
dt ∗ ∂F/∂λ f
− .
dλ f ∂F/∂t ∗
The denominator is positive: ∂F/∂t ∗ > 0. It remains to
show that the numerator is negative. See appendix for
details.
For proof of the claim that t ∗ is increasing in δ, see
the appendix. 
Note that by Corollary 2, with an infinite number
of potential projects, the optimal abandonment time
is monotonic in λ s . Contrast this with the nonmono-
tonic behavior in the single-project case as established
in Lemma 2. This difference arises because the oppor-
tunity cost in the single-project case does not depend
on λ s , while with an infinite number of projects, the
opportunity cost increases with λ s .
4.1. Asymptotic Behavior of the Optimal Stopping
Time as a Function of the Prior Probability of
Successful Completion
Corollary 2 establishes the direction of the relationship
between changes in the prior probability of successful
completion p and the optimal abandonment time t ∗ .
In this section we address the relative magnitude of the
changes in t ∗ as a function of p. The optimal abandon-
ment time t ∗ solves (13), which can be rewritten as (for
the steps in the process, see the proof in the appendix
that t ∗ is increasing in δ):
e (λ s −λ f )t∞ − 1 e −(λ f +δ)t∞ − 1
∗ ∗
λs + δ
+ 
λs − λ f (λ f + δ) δ(1 − p)(λ s − λ f )
λ + δ δ∆
 
· 0 e − 1 . (14)
λ0
Denote the solution to (13) (or equivalently, (14)) as
a function of p, holding all of the other parameters
(δ, ∆, λ s , λ f , and λ 0 ) fixed, as t ∗ (p).
Lemma 3. The optimal abandonment time satisfies t ∗ (0) <
t ∗ (p) < t ∗ (0)/(1 − p).
Proof. Corollary 2 establishes that t ∗ (p) is increasing
in p, so t ∗ (0) < t ∗ (p).
Let
λs + δ λ 0 + δ δ∆
 
g(p)  e −1 ,
δ(1 − p)(λ s − λ f ) λ0
the right-hand side of (14). Observe that g(p) 
g(0)/(1 − p). The left-hand side of (14) is convex and
increasing in t ∗ , and it is equal to 0 when t ∗  0. There-
fore, g(p)/t ∗ (p) > g(0)/t ∗ (0), and
g(p) ∗
t ∗ (p) < t (0)  t ∗ (0)/(1 − p). 
g(0)
Lemma 3 bounds the variation in t ∗ (p) for p small.
For example, if p < 0.2, t ∗ (p) < 1.25t ∗ (0). In this sense,
the optimal abandonment time is relatively insensitive
to changes in the prior probability of successful com-
pletion for small values of that probability.
Lemma 3 can be extended to show that for two prior
probabilities p 1 and p2 with p 1 < p2 , the optimal aban-
donment times are such that t ∗ (p1 ) < t ∗ (p2 ) < t ∗ (p 1 ) ·
(1 − p1 )/(1 − p2 ).
4.2. Allowing Recall
Thus far we have assumed that once a project that
had neither been successfully completed nor failed was
abandoned; it could not be worked on again. For the
case with an infinite number of probabilistically iden-
tical potential projects, we can relax that assumption
and allow recall of previously abandoned projects. As
is true in infinite-horizon models of search in gen-
eral, though, recalling a previously abandoned project
is never optimal—one can always do better in expec-
tation by drawing an unresearched project. A similar
result obtains in multiarmed bandits: once an arm is
set aside, it is never pulled again because the Gittins
index of the untried arm is greater than the index of
the rejected arm.
 McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
808 Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS

In the finite case, however, these results fail to obtain. same, t11∗  t1∗ . However, for k > 1, k finite, Equations (5)
That is, there may be circumstances under which and (15) are different, and thus the equations for the
recalling a previously rejected item is optimal. Con- optimal stopping times are different. For instance, for
sider, for example, if there are only 10 projects to k  2,
be researched. Once the researcher has tested all 10
π11 δ
 
1 1−p
projects—successfully completing some, having some t21∗ − ln
fail, and abandoning the rest—it may be optimal to λs − λ f p (R + π0 )λ s − π11 (λ s + δ)
π1 δ
 
recall a previously abandoned project. Allowing recall 1 1−p
<− ln  t2∗ .
generally makes the problem intractable. A variety λs − λ f p Rλ s − π1 δ
of numerical approaches have been suggested for the
bandit problem with recall (see Jun 2004 for a sur- That is, if a decision maker has just begun the second-
vey), which, as we have noted, is closely related to the to-last possible project, she will continue working on
dynamic programming approach we use. Because our that project longer if she is able to earn rewards from
interest is in analytic solutions, we do not consider the both of the remaining projects than if she can earn a
finite case with recall. reward from only one of the remaining two. It is worth
spending a little longer on the project at hand because
4.3. Only a Single Reward Can Be Earned its reward can be banked and added to the reward from
The model developed above and in Section 3 allows the last remaining project.
the firm to earn the reward R for as many projects If there are an infinite number of potential projects
as are successfully completed. Alternatively, one can but only a single reward can be earned, Equation (9)
consider the case wherein only one reward can be becomes

 p(R + π0 ) λ s (1 − e −(λ s +δ)t )

earned. For example, Ph.D. students submit only one  
dissertation to earn their degree. Indeed, in many  λs + δ


cases, only one solution to a particular technological 
λ

v (t)  e
1 −δ∆ 
. (16)
f

or research problem is needed, only one partner (e.g.,  + (1 − p)π1 (1 − e −(λ f +δ)t ) 
λ + δ

supplier, employer, employee) to be found. In this sec-  f 
 + (pe −λ s t + (1 − p)e −λ f t )π1 e −δt 
 
tion, we consider the case of a single reward and use  
superscript1 to distinguish it from the case of multiple
rewards considered earlier. We provide the solutions Optimizing with respect to t yields
for the case λ s > λ f , which yields a finite optimal aban- π1 δ
 
1 1−p
donment time. t 1∗  − ln , (17)
λs − λ f p (R + π0 )λ s − π 1 (λ s + δ)
The recursive Equation (5) becomes
and then completing the recursion for π1 :
 p(R + π0 ) λ s (1 − e −(λ s +δ)t )
 
λ + δ λ0

π1  v 1 (t 1∗ ).
 s

λ λ0 + δ
 
v k (t)  e
1 −δ∆ 
−(λ f +δ)t  , (15)
f

 + (1 − p)π1 (1 − e )
k−1
λf +δ Note the close resemblance of (16) and (17) to
 
 
 + (pe −λ s t + (1 − p)e −λ f t )π1 e −δt 
  the value function and optimal abandonment Equa-
k−1
  tions ((9) and (10)) for the case in which many rewards
with π k−1 in the beginning of the right-hand side of can be earned. Indeed, the optimal stopping time is the
Equation (5) changed to π0 , reflecting the fact that once same in both cases: t 1∗  t∞
∗
. To see this, follow the same
the reward is earned, future payoffs are only from the procedure as in Section 3 to yield exactly the same
nonproject activity π0 . Then Equation (13) for the optimal stopping time (see the
appendix for details). This result is rather surprising
∞
λ0
∫
π1k  λ0 e −λ0 x e −δx v k1 dx  v1 , and unlike the finite (k > 2) case: as long as there are
0 λ0 + δ k an infinite number of possible projects, it does not mat-
ter whether the firm can earn one or many rewards.
and the optimal stopping time t k1∗ is given by In each case, the firm spends the same amount of time

π1k−1 δ
 on a project before abandoning it and searching for a
1 1−p
t k1∗ − ln . new project. The opportunity value is greatly dimin-
λs − λ f p (R + π0 )λ s − π 1k−1 (λ s + δ) ished when there is only one possible reward, but that
If only one potential project is available (i.e., k  1), diminishment equally affects the value of the project
then the problems with one reward and multiple at hand.
rewards are equivalent. That is, for k  1, Equations (5) Corollary 3. The optimal abandonment time t 1∗ is increas-
and (15) are the same; hence, their solutions are the ing in p, δ, ∆, and λ f ; it is decreasing in λ 0 and λ s ; and it
same. In particular, the optimal stopping times are the is unaffected by changes in R.
McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS 809

Corollary 3 follows immediately from Corollary 2 Figure 3. (Color online) Graph of t ∗ as a Function of p for
and the equivalence of the optimal abandonment time Different Values of λ0
solution (13) for both the one and many rewards cases. 6
The model with one reward also allows us to gain 0 = 0.25
insights into the behavior of a risk-averse searcher. For 5 0 = 0.5
0 = 1
simplicity, assume that the payoff from the non-project
4 0 = 2
activity π0  0—that is, completing the project in infi-
0 = 5
nite time and abandoning it immediately yield the t* 3
same payoff. Then the only uncertainty is the comple-
tion time. If the project is completed at time τ, the pay- 2
off is e −δτ R. Utility for wealth u w (e −δτ R) can be thought
of as utility for completion time u τ (τ)  u w (e −δτ R). If 1

the decision maker is risk averse with constant relative 0

risk aversion, u w (w)  w 1−ρ for 0 < ρ < 1, and therefore
u τ (τ)  (e −δτ R)1−ρ  R 1−ρ e −δ(1−ρ)τ . Constant relative risk
aversion equates to decreasing the discount factor from
δ to δ(1 − ρ): a risk-averse decision maker with constant
relative risk averse utility will behave similar to a risk-
neutral decision maker with a smaller discount factor.
Per Corollary 2, a smaller discount factor leads to an
earlier optimal abandonment time.
Constant relative risk aversion with ρ  1 corre-
sponds to logarithmic utility, u w (w)  ln(w), and in this
case, u τ (τ)  ln(e −δτ R)  ln(R) − δτ. That is, a decision
maker with logarithmic utility will use the same stop-
ping time irrespective of the discount factor δ. In this
case, maximizing E[u τ (τ)]  ln(R) − δE(τ) is equivalent
to minimizing the expected completion time E(τ).
Also note that our results hold for the case of ρ < 0,
in which case u w (w)  w 1−ρ corresponds to risk-seeking
preferences. In this case, a more risk-seeking decision
maker would behave as if he were a risk-neutral deci-
sion maker whose discount factor is greater than δ. An
increase in δ leads to an increase in the optimal aban-
donment time.
4.4. Deriving the Lower Bound on the
Stopping Time
In this section we discuss the optimal stopping time
for the case of an infinite number of potential projects
(i.e., k  ∞) with no discounting (i.e., δ → 0). This case
is interesting because (1) it provides a lower bound on
the optimal stopping time, as t ∗ is increasing with δ
and decreasing with k; (2) this optimal stopping time
is the same for the cases with multiple rewards and
a single reward; (3) in the case of a single reward,
this optimal stopping time corresponds to the behav-
ior of a risk-averse decision maker with logarithmic
utility function, regardless of the discount factor itself;
and (4) in the case of a single reward, this optimal
stopping time corresponds to the optimal behavior
under the objective of minimizing the expected time to
completion.
To derive the equation for t ∗ with δ → 0, we start
with (13), multiplying both sides by δ, and then apply
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
p
Note. Other parameters are λ s  1, λ f  0, δ  0, and ∆  0.
a Taylor series expansion, keeping only the terms
that are linear in δ. Details are in the appendix. This
yields
λs − λ f λs λ
 
(λ s −λ f )t ∗ −λ f t ∗ 1
e + e  +∆ + s . (18)
λf 1 − p λ0 λf
Figure 3 plots the optimal stopping time for λ s  1
and λ f  0 as a function of p for different values of λ 0
with ∆  0. Note that, as long as p < 0.8, the optimal
stopping time does not change much with p. Consis-
tent with Corollaries 2 and 3, t ∗ is decreasing in λ 0 .
Equation (18) allows us to compute the optimal stop-
ping time by knowing only λ s , λ f , and λ0 as long as p
is not too large. In many instances, it might be easier
to estimate λ s , λ f , and λ 0 instead of directly deciding
whether to stop the project at time t. As mentioned in
Section 1, because of organizational inertia, the deci-
sion to stop a project is often difficult, while the deci-
sion to continue is easy. Thus, it might be useful to see
whether the decision to continue is consistent with the
existing estimates of λ s , λ f , and λ 0 . If the estimates λ s
or λ 0 were to increase (e.g., because of acquired pro-
ficiency), then by Corollary 3, one should stop earlier.
Similarly, if the estimate of λ f were to increase (e.g.,
because of more intense competition), one should stop
later.
4.5. Multiple Types of Projects
A project is defined by the prior probability p that it
can be successfully completed, the rate λ s at which
success arrives if possible, the rate λ f at which failure
arrives if that is the case, the fixed cost ∆ before success
can be achieved, and the reward R earned on success-
ful completion. Heretofore all projects are of the same
type in that they all share the same parameter values
(p, λ s , λ f , ∆, R). Suppose instead that there are multi-
ple project types, characterized by (p i , λ si , λ f i , ∆i , R i )
 McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
810 Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS

for i  1, . . . , m. A project of type i occurs with prob-
ability q i . Once a project has been generated, the firm
knows its type. The recursions build as in Section 2.2;
we deal only with the limiting (k  ∞) case here. If the
firm has a project of type i at hand, the firm solves
(1) with the appropriate values of (p i , λ si , λ f i , ∆i , R i ).
Denote this value function as v i (t), and denote the opti-
mal abandonment time as t i∗ . Then the fixed point equa-
tion for the expected value of searching for a project is
λ0 X m
π q v (t ∗ ),
λ 0 + δ i1 i i i
and δ  0.1). For example, if it is optimal to stop the
project with R 1  1 at t1∗  1, then one should stop the
project with R 2  5 at t2∗  2.87, while the project with
R 2  0.5 should not be started at all.
Observe that with multiple project types, it is possi-
ble for search and development to be optimal (i.e., the
firm should start the process) but that some individual
projects should be dropped without being explored.
This could not occur with a single project type, as in
that case either all (ex ante identical) projects should be
(19) explored or none of them should.

where, for i  1, . . . , m,
5. Conclusion
πδ
 
1 1 − pi We developed a model of time and effort allocation
t i∗ − ln . (20)
λ si − λ f i p i R i λ si − πδ to the creative process, a process rife with uncertainty
regarding the chance of success of any individual
For example, university promotion committees often project, the length of time one might wait for a new
assign point values to journals, explicitly or implic- project to appear, and the amount of time required
itly: there are A journals and B journals. An academic
to bring a potentially successful project to completion.
should spend a longer amount of time before abandon-
Whenever a researcher is working on a project, she
ing a project for an A journal than on a project for a B
must consider alternative uses of her time and effort:
journal, other things being equal.
What is the opportunity cost of continuation? If the
In the case of a single project type, one needs to esti-
only alternative facing the researcher is to search out
mate λ 0 in order to derive the optimal stopping time.
For multiple types of projects, the stopping times given and begin devoting effort to some new project, ex ante
by (20) must be consistent. For example, with m  2, identical to the one she is currently working on, then
if the decision maker believes that projects of the first the opportunity cost becomes endogenous. Our focus
type have to be stopped at t1∗ , then she can derive the here is the timing decision: when to give up on the
corresponding π, which in turn will determine t2∗ , thus project at hand in order to search for a new project. Our
providing an extra consistency check. Figure 4 plots focus on the timing of the decision to quit yields several
the optimal stopping time t2∗ for different values of R 2 insights. For a large range of the probability of suc-
as a function of t1∗ , the optimal stopping time for a cessfully completing a project, the optimal solution is
project with R 1  1, giving a sense of the consistency relatively insensitive to this probability (see Section 4.1
that would be required (with the rest of the parameters and Lemma 3). That is, for 0 < p < 0.5, the optimal
at λ s1  λ s2  1, λ f 1  λ f 2  0, p1  p2  0.5, ∆1  ∆2  0, stopping time t ∗ is relatively flat in p. Most research
projects of the nature modeled here (e.g., pharmaceu-
tical discovery) do not have very high initial probabili-
Figure 4. (Color online) Graph of t2∗ as a Function of t1∗ for
Different Values of R2
ties of success, in which case precise estimation of p is
not important. Given that such probabilities are often
10 R2 = 10.0 difficult to assess, this result is important for prescrip-
9 R2 = 5.0
tive purposes. On the other hand, the optimal stopping
R2 = 2.0
8
R2 = 1.0 time t ∗ is sensitive to the arrival rate of new projects
7 R2 = 0.5 (when the firm is searching), the arrival rate of suc-
6 R2 = 0.2 cessful completion for a project that can be successfully
R2 = 0.1
t*2 5 completed, and the arrival rate of failure for projects
4 that are doomed to fail.
3 Given the empirical evidence of organizational iner-
2
tia and personal procrastination, which lead to con-
tinuing projects long after they should have been
1
abandoned, one practical application of our results
0
0 1 2 3 4 5 6 7 8 9 10 would be for setting an alarm clock: if a project has
t1* not been successfully completed by the time its alarm
Note. Other parameters are λ s1  λ s2  1, λ f 1  λ f 2  0, p1  p 2  0.5, goes off, the project should be terminated, and efforts
∆1  ∆2  0, δ  0.1, and R1  1. should be devoted to searching for something new.
McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS 811

Acknowledgments Substitute for R in (12):

The authors are grateful to the reviewers for helpful com- λf
 p(R + π) λ s + (1 − p)π
 
ments and to the INSEAD Center for Decision Making and + (1 − p) 
λ0 −δ∆  λ s + δ λ f + δ 
Risk Analysis for hospitality and support. π e 

 (λ f +δ)/(λ s −λ f ) 
λ0 + δ  πδ(λ s − λ f ) 1 − p πδ


· 
 (λ f + δ)(λ s + δ) p Rλ s − πδ
Appendix

  
δ λs
  
Derivation of Equation (7) 1 − p (λ s −λ f )t ∗
p π 1+ +π
 
e
λs λs + δ

Begin by substituting (6) into (5):  p 
λ0 −δ∆ 
λf πδ(λ s − λ f )  .

λ  e
 p(R + π k−1 ) s (1− e −(λ s +δ)tk )
∗
λ0 + δ  + (1 − p)π + (1 − p)
  
λf + δ (λ f + δ)(λ s + δ) 

λ + δ
 
s
   

λ
  · (e −(λ s −λ f )t ∗ )(λ f +δ)/(λ s −λ f )
v k  v k (t k ) e
∗ −δ∆  
f ∗

 +(1− p)π −(λ f +δ)t k 
(1− e ) 
 
k−1
λ + δ Divide through by π:

 f 
 +(pe −λ s tk∗ +(1− p)e −λ f tk∗ )π k−1 e −δtk∗ 
 
δ λs
    
1 − p (λ s −λ f )t ∗
1+ +1 + (1 − p) 
 
   p e
λs λf π k −1  λ0 −δ∆  λs λs + δ
 
p
 p(R + π k−1 ) +(1− p)π k−1 +p

1

e 
λs + δ λ f +δ δ − Rλ s  λ δ(λ λ

λ0 + δ

− )

f s f
 
e .
−(λ f +δ)t
−δ∆  ∗
 · + (1 − p) e 
 · λ + δe −(λ s +δ)tk∗ +(1− p) π k −1δ e −(λ f +δ)tk∗ λf + δ (λ f + δ)(λ s + δ)
  
  
 s
λ f +δ   λf δ(1 − p) 
   p + (1 − p) + 
∗ λ0 −δ∆  λf + δ λs + δ 
Substituting e −t k (((1−p)/p)(π k−1 δ/(Rλ s −π k−1 δ)))1/(λ s −λ f )  e .

λ0 + δ (λ s − λ f ) −(λ +δ)t ∗ 
 
yields  · e s f +
 (λ −λ )t ∗
e f 
 (λ f + δ) 
λf
 p(R+π k−1 ) λ s +(1−p)π k−1
   
 
 Rearrange terms as follows:
 λ s +δ λ f +δ 
(λ s − λ f )
 
 (λ s +δ)/(λ s −λ f ) 
π δ−Rλ π δ
 ∗ ∗
e −(λ f +δ)t

 1−p  e (λ s −λ f )t +
v k e −δ∆  +p k−1 s k−1 . (λ f + δ)
λ s +δ p Rλ s −π k−1 δ 
λ s + δ λ0 + δ δ∆ λf
   
 (λ f +δ)/(λ s −λ f ) 
π δ π δ
 
 +(1−p) k−1
 1−p k−1
  e − p − (1 − p) .
 δ(1 − p) λ0 λf + δ
 λ f +δ p Rλ s −π k−1 δ 
Finally, multiply through by 1/(λ s − λ f ) to yield (13). 
 
Letting (λ s + δ)/(λ s − λ f )  1 + (λ f + δ)/(λ s − λ f ), we get
Corollary 2: t ∗ Is Increasing in λ f
λf
 p(R+π k−1 ) λ s +(1−p)π k−1
 
 
 It remains to show that ∂F/∂λ f is negative, where
 λ s +δ λ f +δ 
 
 1+(λ f +δ)/(λ s −λ f )  F(λ f , t)  (λ f + δ)e (λ s −λ f )t + (λ s − λ f )e −(λ f +δ)t
δ π δ
 
Rλ −π 1−p
λ + δ λ0 + δ δ∆
   
v k e −δ∆  −p s k−1 k−1
− s e − 1 (λ f + δ) − (λ s + δ).

λ +δ p Rλ −π δ
δ(1 − p) λ0

 s s k−1 
 (λ f +δ)/(λ s −λ f ) 
π δ π δ
 
1−p
 +(1−p) k−1 k−1 Denote A  ((λ s + δ)/(δ(1 − p)))(((λ0 + δ)/λ0 )e δ∆ − 1).
 


 λ f +δ p Rλ s −π k−1 δ 
 From (13),
λ λf
 
s
+(1−p)π k−1 (λ f + δ)e (λ s −λ f )t +(λ s − λ f )e −(λ f +δ)t A(λ f + δ)+(λ s + δ)
 
 p(R+π k−1 ) 
λ s +δ λ f +δ
λ + δ λ s − λ f −(λ f +δ)t
 
 

π δ

1−p π δ
 (λ f +δ)/(λ s −λ f )  ⇔ e (λ s −λ f )t −A  s − e .
λ f +δ λ f +δ
 
e −δ∆  −(1−p) k−1 k−1 
 λ s +δ p Rλ s −π k−1 δ 

 (λ f +δ)/(λ s −λ f ) 
π δ π δ ∂F/∂λ f  −t(λ f + δ)e (λ s −λ f )t − t(λ s − λ f )e −(λ f +δ)t
 
 +(1−p) k−1
 1−p k−1



 λ f +δ p Rλ s −π k−1 δ 
 + e (λ s −λ f )t − e −(λ f +δ)t − A
λs λf
 p(R+π k−1 )

+(1−p)π k−1 +(1−p)
  −t(A(λ f + δ) + λ s + δ) − e −(λ f +δ)t + e (λ s −λ f )t − A
λ s +δ λ f +δ

 −t(A(λ f + δ) + λ s + δ) − e −(λ f +δ)t
 
e 
−δ∆ 
 (λ f +δ)/(λ s −λ f )  . 
π δ(λ −λ ) π k−1 δ

1−p
λ + δ λ s − λ f −(λ f +δ)t
 · k−1 s f 
 (λ +δ)(λ +δ) p Rλ −π δ
+ s − e

f s s k−1
λf + δ λf + δ
 
Derivation of (13) λs + δ
To get Equation (13) for t ∗ , solve (10) with respect to R:  −t(A(λ f + δ) + λ s + δ) − e −(λ f +δ)t +
λf + δ
1−p πδ λs + δ − δ − λ f
e −(λ f +δ)t
∗
e −(λ s −λ f )t  −
p Rλ s − πδ λf + δ
δ λs + δ
 
1 − p (λ s −λ f )t ∗
⇔ Rπ 1+ e .  −t(A(λ f + δ) + λ s + δ) + (1 − e −(λ f +δ)t ).
λs p λf + δ
 McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
812 Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS

As A > 0, it is enough to show that Solve (17) for (R + π0 ):

λs + δ π1 δ
 
1 1−p
(1 − e −(λ f +δ)t ) < t(λ s + δ), t − 1∗
ln
λf + δ λs − λ f p (R + π0 )λ s − π1 (λ s + δ)
1 1 − p (λ s −λ f )t 1∗ 1 (δ + λ s )
or, equivalently, 1 − e −(λ f +δ)t < t(λ f + δ), which holds for ⇔ (R + π0 )  e π δ + π1 .
λs p λs
t > 0. 
Substitute for (R + π0 ) in (A.1):
Corollary 2: t ∗ Is Increasing in δ  
p 1
 1−p (λ s −λ f )t 1∗ 1 
To finish the proof of Corollary 2, Equation (13), which solves e π δ+π 1
(δ+λ s +π 
) 1

for t ∗ , can be rewritten as λ0 −δ∆  λ s +δ p


π1  e .

λ0 +δ
 (1−p)δ(λ −λ )
 s f −(λ −λ )t 1∗ (λ +δ)/(λ −λ ) 
∗ ∗ · (e s f ) f s f
e (λ s −λ f )t∞ e −(λ f +δ)t∞  (λ f +δ)(λ s +δ)

+

λs − λ f (λ f + δ)
 

λs + δ λ 0 + δ δ∆

λf
 Divide through by π1 and rearrange terms to yield
 e − 1 + 1 − p − (1 − p)
δ(1 − p)(λ s − λ f ) λ0 λf + δ e (λ s −λ f )t
1∗
e −(λ f +δ)t
1∗

λs + δ λ 0 + δ δ∆ +
δ
 
λs − λ f (λ f + δ)
 e − 1 + (1 − p)
δ(1 − p)(λ s − λ f ) λ0 λf + δ λs + δ λ0 + δ δ∆

λf

λs + δ λs + δ λ0 + δ δ∆
   e − p − (1 − p) ,
 + e −1 δ(1 − p)(λ s − λ f ) λ0 λf + δ
(λ s − λ f )(λ f + δ) δ(1 − p)(λ s − λ f ) λ0
which matches (13), the equation for the optimal stopping
λs + δ λ0 + δ δ∆
 
1 1
 + + e −1 , time in the case of many rewards, exactly. 
λ s − λ f (λ f + δ) δ(1 − p)(λ s − λ f ) λ0
Derivation of Equation (18)
from which it follows that
Multiply both sides of (13) by δ:
∗ ∗
e (λ s −λ f )t∞ − 1 e −(λ f +δ)t∞ − 1 λs + δ λ 0 + δ δ∆
 
∗ ∗
+  e −1 . δe (λ s −λ f )t δe −(λ f +δ)t
λs − λ f (λ f + δ) δ(1 − p)(λ s − λ f ) λ0 +
λs − λ f (λ f + δ)
λs + δ λ0 + δ δ∆ λf
 
∗
The left-hand side is increasing in t∞ and decreasing in δ:  e − p − (1 − p) .
(1 − p)(λ s − λ f ) λ0 λf + δ
∂
 
1 ∗
(e −(λ f +δ)t∞ − 1) Apply a Taylor series expansion, and keep the terms that are
∂δ (λ f + δ)
linear in δ:
∗
1 ∗ t∞ ∗
− (e −(λ f +δ)t∞ − 1) − e −(λ f +δ)t∞ ∗
δe (λ s −λ f )t δe −λ f t
∗
λ s +δ δ
 
(λ f + δ) 2 (λ f + δ) +  1+ (1+δ∆)−p
1 λ s −λ f λf (1−p)(λ s −λ f ) λ0
∗
 (1 − e −(λ f +δ)t∞ − (λ f + δ)t∞
∗
) < 0. 
δ

(λ f + δ)2 −(1−p) 1− ⇔
λf
At the same time, the right-hand side is increasing in δ: ∗ ∗
λs
δe (λ s −λ f )t δe −λ f t δ δ
 
+  +δ∆+(1−p) ⇔
∂ 1 λ0 + δ δ∆
   λ s −λ f λf (1−p)(λ s −λ f ) λ0 λf
e −1 ∗ ∗
∂δ δ λ0 e (λ s −λ f )t e −λ f t λs
 
1 1−p
+  +∆+ ⇔
1 λ s −λ f λf (1−p)(λ s −λ f ) λ 0 λf
 2 (λ0 − λ0 e ∆δ + ∆δ2 e ∆δ + ∆δλ0 e ∆δ )
δ λ0 λ s −λ f −λ t ∗ λs λ
 
∗ 1
e (λ s −λ f )t + e f  +∆ + s . 
∝ λ0 e −∆δ − λ0 + ∆δ 2 + ∆δλ0  λ 0 (e −∆δ − 1 + ∆δ) + ∆δ2 > 0. λf (1−p) λ0 λf
∗
Therefore, t∞ is increasing in δ. 
References
Establishing That t 1∗  t∞
∗
Alizamir S, de Vericourt F, Sun P (2013) Diagnostic accuracy under
The fixed point equation for π1 similar to (12) is congestion. Management Sci. 59(1):157–171.
Alizamir S, de Vericourt F, Sun P (2014) Dismissing decision tasks:
λs λf
 
The optimality of the M-shaped structure. Working paper,
 
 p(R+π0 ) +(1−p)π 1 

 λ s +δ λ f +δ 
 Fuqua School of Business, Duke University.
Berry DA, Fristedt B (1985) Bandit Problems: Sequential Allocation of
λ π 1
δ(λ −λ )
 
0 s f Experiments (Chapman & Hall, London).
+(1−p)
 
π 
1
e −δ∆  .
λ 0 +δ 
 (λ f +δ)(λ s +δ) 
 Bolton P, Harris C (1999) Strategic experimentation. Econometrica
   (λ f +δ)/(λ s −λ f )  67(2):349–374.
 1−p
· π 1
δ 
 Chao RO, Lichtendahl KC Jr, Grushka-Cockayne Y (2014) Incen-
 p (R+π )λ −π 1 (λ +δ)  tives in a Stage-Gate process. Production Oper. Management 23(8):
 0 s s 
(A.1) 1286–1298.
McCardle, Tsetlin, and Winkler: When to Abandon a Research Project and Search for a New One
Operations Research, 2018, vol. 66, no. 3, pp. 799–813, © 2018 INFORMS
Childs PD, Triantis AJ (1999) Dynamic R&D investment policies.
Management Sci. 45(10):1359–1377.
Cooper RG Edgett SJ (2015) Stage-Gate. Accessed July 2015, http://
www.prod-dev.com/stage-gate.php.
Elfenbein DW, Knott AM (2015) Time to exit: Rational, behav-
ioral, and organizational delays. Strategic Management J. 36(7):
957–975.
Gittins JC (1979) Bandit processes and dynamic allocation indices.
J. Roy. Statist. Soc. Ser. B 41(2):148–177.
Horn JT, Lovallo DP, Viguerie SP (2006) Learning to let go: Making
better exit decisions. McKinsey Quart. 2006(2):64–75.
Jun T (2004) A survey on the bandit problem with switching costs.
De Economist 152(4):513–541.
Keller G, Rady S (2015) Breakdowns. Theoret. Econom. 10(1):175–202.
Keller G, Rady S, Cripps M (2005) Strategic experimentation with
exponential bandits. Econometrica 73(1):39–68.
Kornish LJ, Keeney RL (2008) Repeated commit-or-defer decisions
with a deadline: The influenza vaccine composition. Oper. Res.
56(3):527–541.
Lippman SA, McCardle KF (1991) Uncertain search: A model of
search among technologies of uncertain values. Management Sci.
37(11):1474–1490.
Lorenzetti L (2015) World’s first malaria vaccine, from Glaxo-
SmithKline, wins approval from EU. Fortune (July 24), http://
fortune.com/2015/07/24/worlds-first-malaria-vaccine-wins
-recommendation/.
Mandelbaum A (1987) Continuous multi-armed bandits and multi-
parameter processes. Ann. Probab. 15(4):1527–1556.
McCardle KF (1985) Information acquisition and the adoption of new
technology. Management Sci. 31(11):1372–1389.
Negoescu DM, Bimpikis K, Brandeau ML, Iancu DA (2017) Dynamic
learning of patient response types: An application to treating
chronic disease. Management Sci., ePub ahead of print August 21,
https://doi.org/10.1287/mnsc.2017.2793.
813
O’Riordan M (2012) Merck abandons oral vernakalant. Medscape
(March 19), https://www.medscape.com/viewarticle/760527.
Ryan R, Lippman SA (2005) Optimal exit from a deteriorating project
with noisy returns. Probab. Engrg. Inform. Sci. 19(3):327–343.
Smith JE, Ulu C (2012) Technology adoption with uncertain future
costs and quality. Oper. Res. 60(2):262–274.
Smith JE, Ulu C (2017) Risk aversion, information acquisition, and
technology adoption. Oper. Res. 65(4):1011–1028.
Staw BM, Ross J (1987) Knowing when to pull the plug. Harvard Bus.
Rev. 65(2):68–74.
Ulu C, Smith JE (2009) Uncertainty, information acquisition, and
technology adoption. Oper. Res. 57(3):740–752.
Kevin F. McCardle is a professor in the Decisions, Oper-
ations, and Technology Management Area at the UCLA
Anderson School of Management. His research interests lie
in decision analysis (broadly defined); he particularly focuses
on decisions that are made sequentially or competitively.
Ilia Tsetlin is a professor of decision sciences at INSEAD.
His teaching and research interests are in prescriptive deci-
sion making emerging from normative analysis. Two recent
research focuses are generic properties of preferences (multi-
attribute utility, stochastic dominance) and search, deadlines,
and the role of uncertainty.
Robert L. Winkler is James B. Duke Professor at the Fuqua
School of Business and the Department of Statistical Sci-
ence at Duke University. His research interests include deci-
sion analysis, Bayesian statistics, forecasting, and risk analy-
sis. Recent work involves probability forecasting, combining
probabilities, stochastic dominance, sequential decision mak-
ing, and multiattribute utility.