Robust estimation and control under commitment |
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Authors: | Lars Peter Hansen |
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Institution: | a University of Chicago, Chicago, USA b New York University, Hoover Institution, New York, NY 10003, USA |
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Abstract: | In a Markov decision problem with hidden state variables, a decision maker expresses fear that his model is misspecified by surrounding it with a set of alternatives that are nearby as measured by their expected log likelihood ratios (entropies). Sets of martingales represent alternative models. Within a two-player zero-sum game under commitment, a minimizing player chooses a martingale at time 0. Probability distributions that solve distorted filtering problems serve as state variables, much like the posterior in problems without concerns about misspecification. We state conditions under which an equilibrium of the zero-sum game with commitment has a recursive representation that can be cast in terms of two risk-sensitivity operators. We apply our results to a linear quadratic example that makes contact with findings of T. Ba?ar and P. Bernhard H∞-Optimal Control and Related Minimax Design Problems, second ed., Birkhauser, Basel, 1995] and P. Whittle Risk-sensitive Optimal Control, Wiley, New York, 1990]. |
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Keywords: | C32 C52 D81 D83 D84 |
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