Optimality, Equilibrium, and Curb Sets in Decision Problems without Commitment
P. Jean-Jacques Herings,
Andrey Meshalkin and
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Andrey Meshalkin: Microeconomics & Public Economics
No 21, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)
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.
JEL-codes: C61 C62 C73 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth, nep-mic and nep-upt
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Journal Article: Optimality, Equilibrium, and Curb Sets in Decision Problems Without Commitment (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2016021
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