Time inconsistency and self-control optimization problems: Progress and challenges

Yun Shi; Xiangyu Cui

doi:10.1007/978-3-319-53518-0_3

Time inconsistency and self-control optimization problems: Progress and challenges

Yun Shi
, Xiangyu Cui^*

^*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceeding › Chapter › peer-review

1 Scopus citations

Abstract

Time inconsistency has been an important issue in many stochastic decision problems arisen in real life and financial decision making, especially in the dynamic investment area. When a stochastic decision problem is time inconsistent, the decision maker would be puzzled by his/her conflicting decisions “optimally” derived from his/her time-varying preferences at different time instants. In the literature, the time inconsistent problem is also called the self-control problem, as the decision maker needs to exert proper self-control to resist present temptation and then achieve a better long-term performance. Different approaches dealing with time inconsistency in the literature are reviewed in this paper. After that, the open questions and challenges are also discussed.

Original language	English
Title of host publication	International Series in Operations Research and Management Science
Publisher	Springer New York LLC
Pages	33-42
Number of pages	10
DOIs	https://doi.org/10.1007/978-3-319-53518-0_3
State	Published - 2017
Externally published	Yes

Publication series

Name	International Series in Operations Research and Management Science
Volume	252
ISSN (Print)	0884-8289

Keywords

Dynamic portfolio optimization
Non-separable problem
Present bias
Quasi-hyperbolic discounting function
Self-control
Time inconsistency

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10.1007/978-3-319-53518-0_3

Cite this

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title = "Time inconsistency and self-control optimization problems: Progress and challenges",

abstract = "Time inconsistency has been an important issue in many stochastic decision problems arisen in real life and financial decision making, especially in the dynamic investment area. When a stochastic decision problem is time inconsistent, the decision maker would be puzzled by his/her conflicting decisions “optimally” derived from his/her time-varying preferences at different time instants. In the literature, the time inconsistent problem is also called the self-control problem, as the decision maker needs to exert proper self-control to resist present temptation and then achieve a better long-term performance. Different approaches dealing with time inconsistency in the literature are reviewed in this paper. After that, the open questions and challenges are also discussed.",

keywords = "Dynamic portfolio optimization, Non-separable problem, Present bias, Quasi-hyperbolic discounting function, Self-control, Time inconsistency",

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series = "International Series in Operations Research and Management Science",

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Time inconsistency and self-control optimization problems: Progress and challenges. / Shi, Yun; Cui, Xiangyu.
International Series in Operations Research and Management Science. Springer New York LLC, 2017. p. 33-42 (International Series in Operations Research and Management Science; Vol. 252).

Research output: Chapter in Book/Report/Conference proceeding › Chapter › peer-review

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AU - Cui, Xiangyu

PY - 2017

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N2 - Time inconsistency has been an important issue in many stochastic decision problems arisen in real life and financial decision making, especially in the dynamic investment area. When a stochastic decision problem is time inconsistent, the decision maker would be puzzled by his/her conflicting decisions “optimally” derived from his/her time-varying preferences at different time instants. In the literature, the time inconsistent problem is also called the self-control problem, as the decision maker needs to exert proper self-control to resist present temptation and then achieve a better long-term performance. Different approaches dealing with time inconsistency in the literature are reviewed in this paper. After that, the open questions and challenges are also discussed.

AB - Time inconsistency has been an important issue in many stochastic decision problems arisen in real life and financial decision making, especially in the dynamic investment area. When a stochastic decision problem is time inconsistent, the decision maker would be puzzled by his/her conflicting decisions “optimally” derived from his/her time-varying preferences at different time instants. In the literature, the time inconsistent problem is also called the self-control problem, as the decision maker needs to exert proper self-control to resist present temptation and then achieve a better long-term performance. Different approaches dealing with time inconsistency in the literature are reviewed in this paper. After that, the open questions and challenges are also discussed.

KW - Dynamic portfolio optimization

KW - Non-separable problem

KW - Present bias

KW - Quasi-hyperbolic discounting function

KW - Self-control

KW - Time inconsistency

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ER -

Time inconsistency and self-control optimization problems: Progress and challenges

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