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Additive valuations of streams of payoffs that satisfy the time value of money principle: characterization and robust optimization

Author

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  • Neyman, Abraham

    (Federmann Center for the Study of Rationality, Hebrew University of Jerusalem)

Abstract

This paper characterizes those preferences over bounded infinite utility streams that satisfy the time value of money principle and an additivity property, and the subset of these preferences that in addition are either impatient or patient. Based on this characterization, the paper introduces a concept of optimization that is robust to a small imprecision in the specification of the preference, and proves that the set of feasible streams of payoffs of a finite Markov decision process admits such a robust optimization.

Suggested Citation

  • Neyman, Abraham, 2023. "Additive valuations of streams of payoffs that satisfy the time value of money principle: characterization and robust optimization," Theoretical Economics, Econometric Society, vol. 18(1), January.
    • Handle: RePEc:the:publsh:4784
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    References listed on IDEAS

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    2. Li, Chen & Wakker, Peter P., 2024. "A simple and general axiomatization of average utility maximization for infinite streams," Journal of Economic Theory, Elsevier, vol. 216(C).

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    More about this item

    Keywords

    Valuations; utility; robust optimization; infinite streams of payoffs;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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