Template-type: ReDif-Paper 1.0
Author-Name: Herings, Jean-Jacques
Author-workplace-name: Microeconomics & Public Economics, RS: GSBE ETBC
Author-Name: Meshalkin, Andrey
Author-workplace-name: Microeconomics & Public Economics
Author-Name: Predtetchinski, Arkadi
Author-workplace-name: Microeconomics & Public Economics, RS: GSBE ETBC
Title: Optimality, Equilibrium, and Curb Sets in Decision Problems without Commitment
Abstract: The paper considers a class of decision problems with infinite time horizon that contains Markov decision problems as an important special case. Our interest concerns the case where the decision maker cannot commit himself to his future action choices. We model the decision maker as consisting of multiple selves, where each history of the decision problem corresponds to one self. Each self is assumed to have the same utility function as the decision maker. We introduce the notions of Nash equilibrium, subgame perfect equilibrium, and curb sets for decision problems. An optimal policy at the initial history is a Nash equilibrium but not vice versa. Both subgame perfect equilibria and curb sets are equivalent to subgame optimal policies. The concept of a subgame optimal policy is therefore robust to the absence of commitment technologies.
Classification-JEL: c61,c62,c73
Series: GSBE Research Memoranda
Creation-Date: 20160501
Number: 021
File-URL: https://cris.maastrichtuniversity.nl/ws/files/2621339/RM16021.pdf
File-Format: application/pdf
File-Size: 499184
Handle: Repec:unm:umagsb:2016021
DOI: 10.26481/umagsb.2016021