Dynamic decision making with feasibility goals: A procedural-rationality approach

Johannes Binswanger (1)

1 Department of Economics

This paper proposes a new framework of intertemporal choice: decision making by means of so-called feasibility goals. These refer to the feasibility of certain target levels of consumption associated with specific future benchmark scenarios. The feasibility goals framework takes into account bounded/procedural rationality without stepping outside the realm of an optimization framework. The paper has two aims. First, it provides a general characterization of the feasibility goals framework. Second, it provides a simple life cycle model with feasibility goals to illustrate the applicability of the concept. The life cycle model is promising for better understanding individual portfolio choice.

Mots clés: portfolio choice; Feasibility goals; planning; bounded/procedural rationality; life cycle saving; portfolio choice.

Domaines: Économie et finance quantitative [q-fin]

Johannes Binswanger. Dynamic decision making with feasibility goals: A procedural-rationality approach. Journal of Economic Behavior and Organization, 2011, 78 (3), pp.219. ⟨10.1016/j.jebo.2011.01.006⟩. ⟨hal-00989522⟩