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A theory of endogenous time preference, and discounted utility anomalies
Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2005
function and underlying uncertainty. We provide analytic expressions and numerical examples for discount factors assuming … simple utility functions and gaussian uncertainty. …
Persistent link: https://www.econbiz.de/10005135046
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Tipping Points and Ambiguity in the Economics of Climate Change
Lemoine, Derek M.; Traeger, Christian P. - National Bureau of Economic Research (NBER) - 2012
We model welfare-maximizing policy in an infinite-horizon setting when the probability of a tipping point, the welfare change due to a tipping point, and knowledge about a tipping point's trigger all depend on the policy path. Analytic results demonstrate how optimal policy depends on the...
Persistent link: https://www.econbiz.de/10010969374
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Continuous-Time Methods for Integrated Assessment Models
Judd, Kenneth L.; Lontzek, Thomas S.; Cai, Yongyang - National Bureau of Economic Research (NBER) - 2012
Continuous time is a superior representation of both the economic and climate systems that Integrated Assessment Models (IAM) aim to study. Moreover, continuous-time representations are simple to express. Continuous-time models are usually solved by discretizing time, but the quality of a...
Persistent link: https://www.econbiz.de/10010950988
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General option exercise rules, with applications to embedded options and monopolistic expansion
Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2005
technology, the other - demand uncertainty. The impact of these factors on new technology adoption is analyzed. It is shown that … depending on the situation and type of uncertainty, the diffusion uncertainty and jump uncertainty can produce opposite effects. …
Persistent link: https://www.econbiz.de/10005076973
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Robust Optimal Policy in a Forward-Looking Model with Parameter and Shock Uncertainty
Giannoni, Marc P. - National Bureau of Economic Research (NBER) - 2006
uncertainty about model parameters and shock processes. We show that the robust optimal policy rule is likely to involve a … uncertainty. Thus parameter uncertainty alone does not necessarily justify a small response of monetary policy to perturbations …. However uncertainty may amplify the degree of "super-inertia" required by optimal monetary policy. We finally discuss the …
Persistent link: https://www.econbiz.de/10005084782
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Thinking Ahead: The Decision Problem
Bolton, Patrick; Faure-Grimaud, Antoine - National Bureau of Economic Research (NBER) - 2005
We propose a model of bounded rationality based on time-costs of deliberating current and future decisions. We model an individual decision maker%u2019s thinking process as a thought-experiment that takes time and let the decision maker %u201Cthink ahead%u201D about future decision problems in...
Persistent link: https://www.econbiz.de/10005718599
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Satisficing Contracts
Bolton, Patrick; Faure-Grimaud, Antoine - National Bureau of Economic Research (NBER) - 2009
We propose a model of equilibrium contracting between two agents who are "boundedly rational" in the sense that they face time-costs of deliberating current and future transactions. We show that equilibrium contracts may be incomplete and assign control rights: they may leave some enforceable...
Persistent link: https://www.econbiz.de/10005830681
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Robust expectations and uncertain models – A robust control approach with application to the New Keynesian economy
Kilponen, Juha - EconWPA - 2004
This paper extends Svensson and Woodford’s (2003) partial information framework by allowing the private agents to achieve robustness against incomplete information about the structure of the economy by distorting their expectations in a particular direction. It shows how a linear rational...
Persistent link: https://www.econbiz.de/10005125627
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Time and nodal decomposition with implicit non-anticipativity constraints in dynamic portfolio optimization
Barro, Diana; Canestrelli, Elio - EconWPA - 2005
We propose a decomposition method for the solution of a dynamic portfolio optimization problem which fits the formulation of a multistage stochastic programming problem. The method allows to obtain time and nodal decomposition of the problem in its arborescent formulation applying a discrete...
Persistent link: https://www.econbiz.de/10005125637
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Optimal stopping made easy
Boyarchenko, Svetlana; Levendorskiy, Sergey - EconWPA - 2004
the underlying uncertainty is modelled as a random walk on a lattice. The method of the paper is based on the use of the …
Persistent link: https://www.econbiz.de/10005134695