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VOL. 52 | 2006 Some results on the Gittins index for a normal reward process


We consider the Gittins index for a normal distribution with unknown mean $\theta$ and known variance where $\theta$ has a normal prior. In addition to presenting some monotonicity properties of the Gittins index, we derive an approximation to the Gittins index by embedding the (discrete-time) normal setting into the continuous-time Wiener process setting in which the Gittins index is determined by the stopping boundary for an optimal stopping problem. By an application of Chernoff's continuity correction in optimal stopping, the approximation includes a correction term which accounts for the difference between the discrete and continuous-time stopping boundaries. Numerical results are also given to assess the performance of this simple approximation.


Published: 1 January 2006
First available in Project Euclid: 28 November 2007

zbMATH: 1268.60053
MathSciNet: MR2427855

Digital Object Identifier: 10.1214/074921706000001111

Primary: 60G40
Secondary: 90C39

Rights: Copyright © 2006, Institute of Mathematical Statistics


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