Decision Making in Uncertain and Changing Environments

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Decision Making in Uncertain and Changing Environments

Author Info

Karl Schlag (Pompeu Fabra University)
Andriy Zapechelnyuk () (University of Bonn and Kyiv School of Economics)

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Andriy Zapechelnyuk

Abstract

We consider an agent who has to repeatedly make choices in an uncertain and changing environment, who has full information of the past, who discounts future payoffs, but who has no prior. We provide a learning algorithm that performs almost as well as the best of a given finite number of experts or benchmark strategies and does so at any point in time, provided the agent is sufficiently patient. The key is to find the appropriate degree of forgetting distant past. Standard learning algorithms that treat recent and distant past equally do not have the sequential epsilon optimality property.

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Paper provided by Kyiv School of Economics in its series Discussion Papers with number 19.

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Date of creation: Jun 2009
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Handle: RePEc:kse:dpaper:19

Note: Under review in Review of Economic Studies
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Paper
- Karl H. Schlag & Andriy Zapechelnyuk, 2009. "Decision Making in Uncertain and Changing Environments," Levine's Working Paper Archive 814577000000000259, David K. Levine. [Downloadable!]
- Karl Schlag & Andriy Zapechelnyuk, 2009. "Decision Making in Uncertain and Changing Environments," Economics Working Papers 1160, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]

Find related papers by JEL classification:
C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Statistical Decision Theory; Operations Research
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-07-03 (All new papers)
NEP-GTH-2009-07-03 (Game Theory)

References listed on IDEAS
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Fudenberg, Drew & Levine, David K., 1999. "Conditional Universal Consistency," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 104-130, October. [Downloadable!] (restricted)
Other versions:
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Other versions:
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Other versions:
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Other versions:
- George Mailath & Andrew Postlewaite & Larry Samuelson, 2003. "Contemporaneous Perfect Epsilon-Equilibria," PIER Working Paper Archive 03-021, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
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Sergiu Hart & Andreu Mas-Colell, 2000. "A Simple Adaptive Procedure Leading to Correlated Equilibrium," Econometrica, Econometric Society, vol. 68(5), pages 1127-1150, September.
Other versions:
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- Sergiu Hart & Andreu Mas-Colell, 1996. "A Simple Adaptive Procedure Leading to Correlated Equilibrium," Economics Working Papers 200, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1996. [Downloadable!]

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