Relaxed Equilibria for Time-Inconsistent Markov Decision Processes

This paper considers an infinite-horizon Markov decision process (MDP) that allows for general nonexponential discount functions in both discrete and continuous time. Because of the inherent time inconsistency, we look for a randomized equilibrium policy (i.e., relaxed equilibrium) in an intrapersonal game between an agent’s current and future selves. When we modify the MDP by entropy regularization, a relaxed equilibrium is shown to exist by a nontrivial entropy estimate. As the degree of regularization diminishes, the entropy-regularized MDPs approximate the original MDP, which gives the general existence of a relaxed equilibrium in the limit by weak convergence arguments. As opposed to prior studies that consider only deterministic policies, our existence of an equilibrium does not require any convexity (or concavity) of the controlled transition probabilities and reward function. Interestingly, this benefit of considering randomized policies is unique to the time-inconsistent case.

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Publication Details

Journal
Mathematics of Operations Research
Published
2024-10-23
DOI
https://doi.org/10.1287/moor.2023.0209
Citations
3
Primary Topic
Decision-Making and Behavioral Economics
Type
article
Field-Weighted Citation Impact
1.07
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article

Relaxed Equilibria for Time-Inconsistent Markov Decision Processes

Erhan Bayraktar, Zhou Zhou, Yu‐Jui Huang, Zhenhua Wang
3 citations
Mathematics of Operations Research
Decision-Making and Behavioral Economics
1.07
article

Relaxed Equilibria for Time-Inconsistent Markov Decision Processes

Erhan Bayraktar, Zhou Zhou, Yu‐Jui Huang, Zhenhua Wang
article en
3 citations

Abstract

This paper considers an infinite-horizon Markov decision process (MDP) that allows for general nonexponential discount functions in both discrete and continuous time. Because of the inherent time inconsistency, we look for a randomized equilibrium policy (i.e., relaxed equilibrium) in an intrapersonal game between an agent’s current and future selves. When we modify the MDP by entropy regularization, a relaxed equilibrium is shown to exist by a nontrivial entropy estimate. As the degree of regularization diminishes, the entropy-regularized MDPs approximate the original MDP, which gives the general existence of a relaxed equilibrium in the limit by weak convergence arguments. As opposed to prior studies that consider only deterministic policies, our existence of an equilibrium does not require any convexity (or concavity) of the controlled transition probabilities and reward function. Interestingly, this benefit of considering randomized policies is unique to the time-inconsistent case.

Mathematics of Operations ResearchVol. 50(4)
The University of Sydney (AU), Shandong University (CN), University of Colorado Boulder (US), University of Michigan (US), Shandong University of Finance and Economics (CN)
Peace, Justice and strong institutions
Openalex Percentile: Top 22%
Decision-Making and Behavioral Economics
1.07
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Relaxed Equilibria for Time-Inconsistent Markov Decision Processes — Erhan Bayraktar, Zhou Zhou, et al. · Mathematics of Operations Research (2024) | TGRS Research Map | TGRS