Possibilistic individual multi-period consumption–investment models

Abstract

In this paper, we consider a multi-period consumption–investment problem with partially known information for an individual. We emphasize the fact that for an individual there is one and only one result will appear for his/her consumption–investment decision in each period. Different from the existing multi-period consumption–investment models which basically maximize the expected utility, we utilize the one-shot decision theory for individual multi-period consumption–investment problems. In each period, the individual chooses one state (scenario) for each strategy with considering the satisfaction of the outcome and its possibility. The selected state is called the focus point. The multi-period consumption–investment decision models with twelve types of focus points are built to maximize the sum of discounted consumption over the whole process (lifetime) for twelve types of individuals and economic insights are gained by the theoretical analysis. The proposed models are scenario-based decision models which provide a fundamental alternative to analyze individual multi-period consumption–investment behavior.