A stochastic analysis of the tree paradigm

Abstract The tree paradigm, which is a problem in optimal stopping, has important ramifications for human capital acquisition, search behavior, firm entry, and in the theory of renewable resources. Our paper extends previous work in the stochastic literature on several fronts. We exhibit a tractable solution to the rotation problem for the stochastic model, analyze the effects of inputs which control the growth process, and illustrate our results with a multi-stage learning problem.