756

**A Gridding Method for Sequential Analysis Problems**

**Anthony E. Brockwell and Joseph B. Kadane **

### Abstract:

This paper introduces a numerical method
for finding optimal or approximately optimal
decision rules and corresponding expected
losses in Bayesian sequential decision problems.
The method, based on the classical backward induction
method, constructs a grid approximation
to the expected loss at each decision time,
viewed as a function of certain statistics
of the posterior distribution of the parameter
of interest.
In contrast with existing techniques,
this method has a computation time which
is linear in the number of stages in the sequential
problem.
It can also be applied to problems with insufficient
statistics for the parameters of interest.
Furthermore, it is well-suited to be implemented
using parallel processors.

*Heidi Sestrich*

*9/18/2001*
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