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

  • 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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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 78 (2011)
Issue (Month): 3 (May)
Pages: 219-228

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Handle: RePEc:eee:jeborg:v:78:y:2011:i:3:p:219-228
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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