| "Certainty Equivalence" and "Model Uncertainty" (2004) | |||||||||||||||
Abstract | |||||||||||||||
| Simon's and Theil's certainty equivalence property justifies a convenient algorithm for solving dynamic programming problems with quadratic objectives and linear transition laws: first, optimize under perfect foresight, then substitute optimal forecasts for unknown future values. A similar decomposition into separate optimization and forecasting steps prevails when a decision maker wants a decision rule that is robust to model misspecification. | |||||||||||||||
Details der Publikation | |||||||||||||||
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