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Valuating Payoff Streams under Unequal Discount Factors

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  • Hannu Salonen

    ()
    (Department of Economics, University of Turku)

  • Hannu Vartiainen

    ()
    (Yrjö Jahnsson Foundation)

Abstract

We study repeated prize allocation problem when the discount factors f the agents are not equal. It is shown that the feasible set of payoffs is not well behaved. In particular, it is not convex as it contains holes and caves. The Pareto frontier is everywhere discontinuous and there is an open subset of discount factors such that the feasible set is totally disconnected.

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Bibliographic Info

Paper provided by Aboa Centre for Economics in its series Discussion Papers with number 16.

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Length: 15
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:tkk:dpaper:dp16

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Related research

Keywords: payoffs; differentiated discount factor; repeated games;

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References

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  1. Ehud Lehrer & Ady Pauzner, 1999. "Repeated Games with Differential Time Preferences," Econometrica, Econometric Society, vol. 67(2), pages 393-412, March.
  2. Fudenberg, Drew & Maskin, Eric, 1991. "On the dispensability of public randomization in discounted repeated games," Journal of Economic Theory, Elsevier, vol. 53(2), pages 428-438, April.
  3. D. Fudenberg and E. Maskin., 1987. "Nash and Perfect Equilibria of Discounted Repeated Games," Economics Working Papers 8736, University of California at Berkeley.
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Cited by:
  1. Kimmo Berg & Mitri Kitti, 2013. "Computing Equilibria in Discounted 2 × 2 Supergames," Computational Economics, Society for Computational Economics, vol. 41(1), pages 71-88, January.
  2. Houba, Harold & Wen, Quan, 2011. "Extreme equilibria in the negotiation model with different time preferences," Games and Economic Behavior, Elsevier, vol. 73(2), pages 507-516.
  3. Yuichi Yamamoto, 2010. "The use of public randomization in discounted repeated games," International Journal of Game Theory, Springer, vol. 39(3), pages 431-443, July.
  4. Chen, Bo & Takahashi, Satoru, 2012. "A folk theorem for repeated games with unequal discounting," Games and Economic Behavior, Elsevier, vol. 76(2), pages 571-581.
  5. Bo Chen & Satoru Fujishige, 2013. "On the feasible payoff set of two-player repeated games with unequal discounting," International Journal of Game Theory, Springer, vol. 42(1), pages 295-303, February.

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