Dynamic benchmark targeting
- Author(s)
- Karl Schlag, Andriy Zapechelnyuk
- 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.
- Organisation(s)
- Department of Economics
- External organisation(s)
- University of St. Andrews
- Journal
- Journal of Economic Theory
- Volume
- 169
- Pages
- 145-169
- No. of pages
- 25
- ISSN
- 0022-0531
- DOI
- https://doi.org/10.1016/j.jet.2017.02.004
- Publication date
- 05-2017
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502045 Behavioural economics, 101015 Operations research
- Keywords
- ASJC Scopus subject areas
- Economics and Econometrics
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/dynamic-benchmark-targeting(6612a94d-91d6-43df-ab7b-f64cb055e10f).html