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Time-Consistent Equilibria in a Differential Game Model with Time Inconsistent Preferences and Partial Cooperation

In: Dynamic Games in Economics

Author

Listed:
  • Jesús Marín-Solano

    (Universitat de Barcelona)

Abstract

Differential games with time-inconsistent preferences are studied. Noncooperative Markovian Nash equilibria are described. If players can cooperate at every instant of time, time-consistent equilibria are analyzed for the problem with partial cooperation. Cooperation is partial in the sense that, although players cooperate at every moment t forming a coalition, due to the time inconsistency of the time preferences, coalitions at different times value the future in a different way, and they are treated as different agents. Time-consistent equilibria are obtained by looking for the Markovian subgame perfect equilibria in the corresponding noncooperative sequential game. The issue of dynamic consistency is then considered. In order to guarantee the sustainability of cooperation, players should bargain at every instant of time their weight in the whole coalition, and nonconstant weights are introduced. The results are illustrated with two examples: a common property resource game and a linear state pollution differential game.

Suggested Citation

  • Jesús Marín-Solano, 2014. "Time-Consistent Equilibria in a Differential Game Model with Time Inconsistent Preferences and Partial Cooperation," Dynamic Modeling and Econometrics in Economics and Finance, in: Josef Haunschmied & Vladimir M. Veliov & Stefan Wrzaczek (ed.), Dynamic Games in Economics, edition 127, pages 219-238, Springer.
    • Handle: RePEc:spr:dymchp:978-3-642-54248-0_11
    DOI: 10.1007/978-3-642-54248-0_11
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