Dynamic benchmark targeting
Abstract
We study decision making in complex discrete-time dynamic environments where Bayesian optimization is intractable. A decision maker is equipped with a finite set of benchmark strategies. She aims to perform similarly to or better than each of these benchmarks. Furthermore, she cannot commit to any decision rule, hence she must satisfy this goal at all times and after every history. We find such a rule for a sufficiently patient decision maker and show that it necessitates not to rely too much on observations from distant past. In this sense we find that it can be optimal to forget.
Citation
Schlag , K H & Zapechelnyuk , A 2017 , ' Dynamic benchmark targeting ' , Journal of Economic Theory , vol. 169 , pp. 145-169 . https://doi.org/10.1016/j.jet.2017.02.004
Publication
Journal of Economic Theory
Status
Peer reviewed
ISSN
0022-0531Type
Journal article
Collections
Items in the St Andrews Research Repository are protected by copyright, with all rights reserved, unless otherwise indicated.