Folk Theorems for Present-Biased Players
AbstractThe folk theorems for infinitely repeated games with discounting presume that the discount rate between two successive periods is constant. Following the literature on quasi-exponential or hyperbolic discounting, I model the repeated interaction between two or more decision makers in a way that allows present-biased discounting where the discount factor between two successive periods increases with the waiting time until the periods are reached. I generalize Fudenberg and Maskin's (1986) and Abreu, Dutta and Smith's (1994) folk theorems for repeated games with discounting so that they apply when discounting is present-biased. Patience is then represented either by the discount factor between the next and the current period or, alternatively, by the sum of the discount factors for all future periods.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 736.
Length: 24 pages
Date of creation: 19 Jun 2011
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folk theorem; present-biased; discounting; hyperbolic;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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