Myopic Decision Rules

Abstract

In a dynamic context a decision maker at any instant t has information about his exogenous economic environment both at time t and at later dates. We represent the environment at t by a vector x(t) of exogenous variables, and their future values by (x(t + l),c + 2),…,ü + T)). The horizon T is determined by such considerations as length of life, technology, resource limitations etc.; it might be infinite. A decision rule at time t is a map ψ_t associating with a vector of a variables z, the variable d representing the choice of the decision maker. We write d = ψ_t(z). Myopic decision rules refer to those maps of the form d(t) = ψ_t(x(t)) in which d(t) depends only upon the values of the exogenous variables at time t, disregarding any information about future conditions of the economic environment. A decision rule is said to be non–myopic if it is of the form d(t) = ψ_t(x(t), x(t=l),…,x(t+T)).