Abstract
Strotz (1956) and Pollak (1968) were among the first to study the behaviour of an economic agent whose preferences change over time. They suggested that such an agent would choose a "consistent plan", which they described as "the best plan that he would actually follow", A Markov-consistent plan has a particularly simple structure: current decisions are independent of past decisions, except insofar as past decisions affect the current values of state variables. Unfortunately, Markov-consistent plans do not general1y exist. In this paper, we demonstrate that the existence problem dissappears for finite horizon problems when one introduces even a small amount of smooth uncertainty into production.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 877-882 |
| Number of pages | 6 |
| Journal | Review of Economic Studies |
| Volume | 53 |
| Issue number | 5 |
| DOIs | |
| State | Published - 1986 |
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ASJC Scopus subject areas
- Economics and Econometrics
Cite this
On the existence of markov-consistent plans under production uncertainty. / Douglas Bernheim, B.; Ray, Debraj.
In: Review of Economic Studies, Vol. 53, No. 5, 1986, p. 877-882.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - On the existence of markov-consistent plans under production uncertainty
AU - Douglas Bernheim, B.
AU - Ray, Debraj
PY - 1986
Y1 - 1986
N2 - Strotz (1956) and Pollak (1968) were among the first to study the behaviour of an economic agent whose preferences change over time. They suggested that such an agent would choose a "consistent plan", which they described as "the best plan that he would actually follow", A Markov-consistent plan has a particularly simple structure: current decisions are independent of past decisions, except insofar as past decisions affect the current values of state variables. Unfortunately, Markov-consistent plans do not general1y exist. In this paper, we demonstrate that the existence problem dissappears for finite horizon problems when one introduces even a small amount of smooth uncertainty into production.
AB - Strotz (1956) and Pollak (1968) were among the first to study the behaviour of an economic agent whose preferences change over time. They suggested that such an agent would choose a "consistent plan", which they described as "the best plan that he would actually follow", A Markov-consistent plan has a particularly simple structure: current decisions are independent of past decisions, except insofar as past decisions affect the current values of state variables. Unfortunately, Markov-consistent plans do not general1y exist. In this paper, we demonstrate that the existence problem dissappears for finite horizon problems when one introduces even a small amount of smooth uncertainty into production.
UR - http://www.scopus.com/inward/record.url?scp=33749985447&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=33749985447&partnerID=8YFLogxK
U2 - 10.2307/2297724
DO - 10.2307/2297724
M3 - Article
AN - SCOPUS:33749985447
VL - 53
SP - 877
EP - 882
JO - Review of Economic Studies
JF - Review of Economic Studies
SN - 0034-6527
IS - 5
ER -