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Additive valuations of streams of payoffs that obey the time-value of money principle: characterization and robust optimization

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  • Abraham Neyman

Abstract

This paper characterizes the preferences over bounded infinite utility streams that satisfy the time-value of money principle and an additivity property, and preferences that in addition are impatient. Based on this characterization, the paper introduces a concept of optimization that is robust to a small imprecision in the specification of the preference, and proves that the set of feasible streams of payoffs of a finite Markov decision process admits such a robust optimization.

Suggested Citation

  • Abraham Neyman, 2018. "Additive valuations of streams of payoffs that obey the time-value of money principle: characterization and robust optimization," Discussion Paper Series dp718, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    • Handle: RePEc:huj:dispap:dp718
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    References listed on IDEAS

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    1. FORGES, Françoise, 1986. "Correlated equilibria in repeated games with lack of information on one side: a model with verifiable types," LIDAM Reprints CORE 700, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Gerard Debreu, 1959. "Topological Methods in Cardinal Utility Theory," Cowles Foundation Discussion Papers 76, Cowles Foundation for Research in Economics, Yale University.
    3. Lauwers, Luc, 1995. "Time-neutrality and linearity," Journal of Mathematical Economics, Elsevier, vol. 24(4), pages 347-351.
    4. Peter Fishburn & Ward Edwards, 1997. "Discount-neutral utility models for denumerable time streams," Theory and Decision, Springer, vol. 43(2), pages 139-166, September.
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    Cited by:

    1. Maya Bar-Hillel & Cass R. Sunstein, 2019. "Baffling bathrooms: On navigability and choice architecture," Discussion Paper Series dp726, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.

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