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Dynamic decision making with feasibility goals: A procedural-rationality approach

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  • Binswanger, Johannes

Abstract

This paper proposes a new framework of intertemporal choice: decision making by means of so-called feasibility goals. These refer to the feasibility of certain target levels of consumption associated with specific future benchmark scenarios. The feasibility goals framework takes into account bounded/procedural rationality without stepping outside the realm of an optimization framework. The paper has two aims. First, it provides a general characterization of the feasibility goals framework. Second, it provides a simple life cycle model with feasibility goals to illustrate the applicability of the concept. The life cycle model is promising for better understanding individual portfolio choice.

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  • Binswanger, Johannes, 2011. "Dynamic decision making with feasibility goals: A procedural-rationality approach," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 219-228, May.
    • Handle: RePEc:eee:jeborg:v:78:y:2011:i:3:p:219-228
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    1. Eling, Martin & Ghavibazoo, Omid & Hanewald, Katja, 2021. "Willingness to take financial risks and insurance holdings: A European survey," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 95(C).
    2. Óscar Eduardo Pérez Rodríguez, 2015. "Interpretations and Theoretical Uses of the Concept of Rationality in Economics," Revista Equidad y Desarrollo, Universidad de la Salle, May.
    3. Salle, Isabelle & Seppecher, Pascal, 2016. "Social Learning About Consumption," Macroeconomic Dynamics, Cambridge University Press, vol. 20(7), pages 1795-1825, October.
    4. Binswanger, Johannes, 2012. "Life cycle saving: Insights from the perspective of bounded rationality," European Economic Review, Elsevier, vol. 56(3), pages 605-623.
    5. Tetsuo Yamamori & Kazuyuki Iwata & Akira Ogawa, 2014. "An Experimental Study of Money Illusion in Intertemporal Decision Making," Working Papers e085, Tokyo Center for Economic Research.

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