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Erscheinungsjahr: 
2025
Schriftenreihe/Nr.: 
Center for Mathematical Economics Working Papers No. 754
Verlag: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Zusammenfassung: 
In ergodic singular stochastic control problems, a decision-maker can instantaneously adjust the evolution of a state variable using a control of bounded variation, with the goal of minimizing a long-term average cost functional. The cost of control is proportional to the magnitude of adjustments. This paper characterizes the optimal policy and the value in a class of multi-dimensional ergodic singular stochastic control problems. These problems involve a linearly controlled one-dimensional stochastic differential equation, whose coefficients, along with the cost functional to be optimized, depend on a multi-dimensional uncontrolled process Y. We first provide general verification theorems providing an optimal control in terms of a Skorokhod reflection at Y-dependent free boundaries, which emerge from the analysis of an auxiliary Dynkin game. We then fully solve two two-dimensional optimal inventory management problems. To the best of our knowledge, this is the first paper to establish a connection between multi-dimensional ergodic singular stochastic control and optimal stopping, and to exploit this connection to achieve a complete solution in a genuinely two-dimensional setting.
Schlagwörter: 
ergodic singular stochastic control
Dynkin games
free boundaries
Skorokhod reflection
variational inequality
optimal inventory management
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