Additive Valuations of Streams of Payoffs That Obey the Time-Value of Money Principle: Characterization and Robust Optimization

Abstract:

This paper characterizes the preferences over bounded infinite utility streams that satisfy the time-value of money principle and an additivity property, and preferences that in addition are impatient. Based on this characterization, the paper introduces a concept of optimization that is robust to a small imprecision in the specification of the preference, and proves that the set of feasible streams of payoffs of a finite Markov decision process admits such a robust optimization.

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