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Inaugural Lecture of Patrick Huen Wing Ming Professorship

Prof. Li Duan, professor in the Department of Systems Engineering and Engineering Management, delivered his inaugural lecture on 15 April as Patrick Huen Wing Ming Professor of Systems Engineering and Engineering Management on the topic 'Taking the Challenge in Coping with Time Inconsistency in Dynamic Decision Making'.

We make decisions every day. At the lecture, Professor Li remarked that if we were to order the many optimization methodologies dealing with sequential decision making problems on the basis of their overall fertility, dynamic programming pioneered by Richard Bellman would be at the top of the list. However, this method is based on the assumption that the preference (risk attitude) of a decision maker be unchanged over time, which is often violated by the inconsistency of human behaviour.

To identify a better strategy to balance long- and short- term interests when facing time inconsistency in dynamic decision-making, Professor Li constructs a planner-doer mean-variance game formulation with self-control, where the planner (the investor in charge of the investment problem as a whole) can influence the preferences of doers (the investors who decide the strategy carried out at different time instances) through commitment by punishment. He further extends the planner-doer game framework to generalize time-inconsistent stochastic decision problems, and shows that the framework is consistent with the current literature of self-control theory.

The Patrick Huen Wing Ming Professorship of Systems Engineering and Engineering Management was established by Mr. Patrick Huen in July 2012 in support of academic research on systems engineering and management science at the Faculty of Engineering.

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