On Optimal Harvesting Problems in Random Environments

TL;DR

This paper studies the optimal harvesting of a species in random environments modeled by regime-switching diffusions, addressing the challenges of extinction time and control continuity, and proposing solutions for optimal strategies.

Contribution

It introduces a new sufficient condition for the continuity of the value function and characterizes it as a viscosity solution of coupled inequalities, advancing stochastic control in ecological models.

Findings

Established a new condition ensuring value function continuity.

Proved the value function is a viscosity solution of coupled inequalities.

Constructed an $ ext{ε}$-optimal harvesting strategy under specific conditions.

Abstract

This paper investigates the optimal harvesting strategy for a single species living in random environments whose growth is given by a regime-switching diffusion. Harvesting acts as a (stochastic) control on the size of the population. The objective is to find a harvesting strategy which maximizes the expected total discounted income from harvesting {\em up to the time of extinction} of the species; the income rate is allowed to be state- and environment-dependent. This is a singular stochastic control problem with both the extinction time and the optimal harvesting policy depending on the initial condition. One aspect of receiving payments up to the random time of extinction is that small changes in the initial population size may significantly alter the extinction time when using the same harvesting policy. Consequently, one no longer obtains continuity of the value function using standard arguments for either regular or singular control problems having a fixed time horizon. This paper introduces a new sufficient condition under which the continuity of the value function for the regime-switching model is established. Further, it is shown that the value function is a viscosity solution of a coupled system of quasi-variational inequalities. The paper also establishes a verification theorem and, based on this theorem, an $\varepsilon$-optimal harvesting strategy is constructed under certain conditions on the model. Two examples are analyzed in detail.