Abstract recursive utility (Q2367775)

As in dynamic programming or in the economic theory of nonpaternalistic intergenerational altruism, a consistent sequence of utility functions \({_ 1U}\) can always be decomposed into a recursive sequence of aggregators. The difficulty lies in the fact that two distinct \({_ 1 U}\)'s can share the same decomposition. In such a case, the decomposition cannot be regarded as equivalent to either of the two utility functions. In contrast, an equivalent decomposition decomposes exactly one \({_ 1 U}\) (i.e., has exactly one recomposition). This paper completely characterizes those \({_ 1 U}\) that have equivalent decompositions. This characterization requires no topological or algebraic structure, and can accomodate vector - and even function- valued utility functions. Given that the utility functions assume values in an antisymmetrically ordered space, the above characterization is related to the ordinal concept of tail insensitivity and to the topological concept of discrete-product continuity. Finally, the papers' results are applied to economic models of stochastic dynamic optimization and intergenerational altruism toward many descendants.