Related papers: Time-consistent decisions and rational expectation…
The nonuniqueness of rational expectations is explained: in the stochastic, discrete-time, linear, constant-coefficients case, the associated free parameters are coefficients that determine the public's most immediate reactions to shocks.…
Bellman formulated a vague principle for optimization over time, which characterizes optimal policies by stating that a decision maker should not regret previous decisions retrospectively. This paper addresses time consistency in stochastic…
Proceeding from the concept of rational expectations, a new dynamic model of supply and demand in a single market with one supplier, one buyer, and one kind of commodity is developed. Unlike the cob-web dynamic theories with adaptive…
A group of experts, for instance climate scientists, is to choose among two policies $f$ and $g$. Consider the following decision rule. If all experts agree that the expected utility of $f$ is higher than the expected utility of $g$, the…
Discontinuities and delayed terms are encountered in the governing equations of a large class of problems ranging from physics and engineering to medicine and economics. These systems cannot be properly modelled and simulated with standard…
In a continuous-time Kyle setting, we prove global existence of an equilibrium when the insider faces a terminal trading constraint. We prove that our equilibrium model produces output consistent with several empirical stylized facts such…
This paper is concerned with dynamic user equilibrium (DUE) with elastic travel demand (E-DUE). We present and prove a variational inequality (VI) formulation of E-DUE using measure-theoretic argument. Moreover, existence of the E-DUE is…
We analyze a simple macroeconomic model where rational inflation expectations is replaced by a boundedly rational, and genuinely sticky, response to changes in the actual inflation rate. The stickiness is introduced in a novel way using a…
Control problems not admitting the dynamic programming principle are known as time-inconsistent. The game-theoretic approach is to interpret such problems as intrapersonal dynamic games and look for subgame perfect Nash equilibria. A…
Stochastic processes that are randomly reset to an initial condition serve as a showcase to investigate non-equilibrium steady states. However, all existing results have been restricted to the special case of memoryless resetting protocols.…
There has been a long-standing and at times fractious debate whether complex and large systems can be stable. In ecology, the so-called `diversity-stability debate' arose because mathematical analyses of ecosystem stability were either…
Large dynamic economies with heterogeneous agents and aggregate shocks are central to many important applications, yet their equilibrium analysis remains computationally challenging. This is because the standard solution approach, rational…
How do decisions change with the economic environment and with time? This paper studies general nonstationary stopping problems and provides the methodological tools to answer these questions. First, we identify conditions that ensure a…
In this paper, we continue our study on a general time-inconsistent stochastic linear--quadratic (LQ) control problem originally formulated in [6]. We derive a necessary and sufficient condition for equilibrium controls via a flow of…
We consider a general time-inconsistent stochastic linear-quadratic differential game. The time-inconsistency arises from the presence of quadratic terms of the expected state as well as state-dependent term in the objective functionals. We…
The object of the present paper is to find new sufficient conditions for the existence of unique strong solutions to a class of (time-inhomogeneous) stochastic differential equations with random, non-Lipschitzian coefficients. We give an…
It is the aim of this work provide a rigorous treatment concerning the formation of spatial rational expectations equlibria in a general class of spatial economic models under the effect of externalities, using techniques from the calculus…
Linear-quadratic optimal control problem for systems governed by forward-backward stochastic differential equations has been extensively studied over the past three decades. Recent research has revealed that for forward-backward control…
This paper presents a new condition for the existence of optimal stationary policies in average-cost continuous-time Markov decision processes with unbounded cost and transition rates, arising from controlled queueing systems. This…
We consider a continuous time stochastic optimal control problem under both equality and inequality constraints on the expectation of some functionals of the controlled process. Under a qualification condition, we show that the problem is…