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On Myopic Equilibria in Dynamic Games with Endogenous Discounting

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  • Wilko Bolt
  • Alexander F. Tieman

Abstract

This paper derives an equilibrium for a competitive multi-stage game in which an agents' current action influences his probability of survival into the next round of play. This is directly relevant in banking, where a banks' current lending and pricing decisions determines its future probability of default. In technical terms, our innovation is to consider a multi-stage game with endogenous discounting. An equilibrium for such a multi-stage game with endogenous discounting has not been derived before in the literature.

Suggested Citation

  • Wilko Bolt & Alexander F. Tieman, 2006. "On Myopic Equilibria in Dynamic Games with Endogenous Discounting," IMF Working Papers 2006/302, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/302
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18867
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    References listed on IDEAS

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    1. Hausken, Kjell, 2005. "The battle of the sexes when the future is important," Economics Letters, Elsevier, vol. 87(1), pages 89-93, April.
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    Cited by:

    1. Aramendia, Miguel & Wen, Quan, 2020. "Myopic perception in repeated games," Games and Economic Behavior, Elsevier, vol. 119(C), pages 1-14.

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