Approximate optimality and the risk/reward tradeoff in a class of bandit problems

Zengjing Chen, Larry Epstein and Guodong Zhang
Additional contact information
Zengjing Chen: Shandong University
Guodong Zhang: Shandong University

Papers from arXiv.org

Abstract: This paper studies a sequential decision problem where payoff distributions are known and where the riskiness of payoffs matters. Equivalently, it studies sequential choice from a repeated set of independent lotteries. The decision-maker is assumed to pursue strategies that are approximately optimal for large horizons. By exploiting the tractability afforded by asymptotics, conditions are derived characterizing when specialization in one action or lottery throughout is asymptotically optimal and when optimality requires intertemporal diversification. The key is the constancy or variability of risk attitude. The main technical tool is a new central limit theorem.

Date: 2022-10, Revised 2023-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2210.08077 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2210.08077

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().