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Repeated games with present-biased preferences

  • Chade, Hector
  • Prokopovych, Pavlo
  • Smith, Lones

We study infinitely repeated games with perfect monitoring, where players have [beta]-[delta] preferences. We compute the continuation payoff set using recursive techniques and then characterize equilibrium payoffs. We then explore the cost of the present-time bias, producing comparative statics. Unless the minimax outcome is a Nash equilibrium of the stage game, the equilibrium payoff set is not monotonic in [beta] or [delta]. Finally, we show how the equilibrium payoff set is contained in that of a repeated game with smaller discount factor.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 139 (2008)
Issue (Month): 1 (March)
Pages: 157-175

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Handle: RePEc:eee:jetheo:v:139:y:2008:i:1:p:157-175
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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