Time Consistent Discounting
A possibly immortal agent tries to maximise its summed discounted rewards over time, where discounting is used to avoid infinite utilities and encourage the agent to value current rewards more than future ones. Some commonly used discount functions lead to time-inconsistent behavior where the agent changes its plan over time. These inconsistencies can lead to very poor behavior. We generalise the usual discounted utility model to one where the discount function changes with the age of the agent. We then give a simple characterisation of time-(in)consistent discount functions and show the existence of a rational policy for an agent that knows its discount function is time-inconsistent.
KeywordsRational agents sequential decision theory general discounting time-consistency game theory
Unable to display preview. Download preview PDF.
- 1.Frederick, S., Oewenstein, G.L., O’Donoghue, T.: Time discounting and time preference: A critical review. Journal of Economic Literature 40(2) (2002)Google Scholar
- 2.Fudenberg, D.: Subgame-perfect equilibria of finite and infinite-horizon games. Journal of Economic Theory 31(2) (1983)Google Scholar
- 7.Legg, S.: Machine Super Intelligence. PhD thesis, University of Lugano (2008)Google Scholar