Optimal Feedback Control Rules Sensitive to Controlled Endogenous Risk-Aversion

Dan Protopopescu ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: The objective of this paper is to correct and improve the results obtained by Van der Ploeg (1984a, 1984b) and utilized in the theoretical literature related to feedback stochastic optimal control sensitive to constant exogenous risk-aversion (Jacobson 1973; Karp 1987; Whittle 1981, 1989, 1990) or to the classic context of risk-neutral decision-makers (Chow 1973, 1976a, 1976b, 1977, 1978, 1981, 1993). More realistic and attractive, this new approach is placed in the context of a time-varying endogenous risk-aversion which is under the control of the decision-maker. It has strong qualitative implications on the agent's optimal policy during the entire planning horizon.

Keywords: Controlled stochastic environment; rational decision-maker; adaptive control; optimal path; feedback optimal strategy; endogenous risk-aversion; dynamic active learning.; Controlled stochastic environment; rational decision-maker; adaptive control; optimal path; feedback optimal strategy; endogenous risk-aversion; dynamic active learning. (search for similar items in EconPapers)
JEL-codes: C51 C61 C91 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt
Date: 2008-06-15, Revised 2009-01-08

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Persistent link: http://EconPapers.repec.org/RePEc:aub:autbar:748.08

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