Self-coordination in time inconsistent stochastic decision problems: A planner-doer game framework

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• 作者：Xiangyu Cui^a ; Duan Li^b ; Yun Shi^c ; ^{y_shi@shu.edu.cn}
• 关键词：G11 ; C7
• 刊名：Journal of Economic Dynamics and Control
• 出版年：2017
• 出版时间：February 2017
• 年：2017
• 卷：75
• 期：Complete
• 页码：91-113
• 全文大小：763 K
• 卷排序：75

文摘

Time inconsistency has been a thorny issue in many economic and financial decision making problems, especially when risk measures are involved in performance criteria. We develop in this paper a two-tier planner–doer game framework with self-coordination. By aligning the global interest of the planner and the local interests of the doers by applying suitable penalty functions, a degree of internal harmony (measured quantitatively by the expected cost of self-coordination) can be achieved by the self-coordination policy. We establish an axiom system for modified preferences, under which the self-coordination policy can be obtained by solving a corresponding optimization problem. We then apply our game framework successfully in dynamic mean-variance portfolio selection.