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Long-sighted principal and myopic agents


  • Demange, Gabrielle
  • Laroque, Guy


We consider a long-lived principal, who can accumulate capital, and faces a sequence of myopic agents. For instance, a farsighted manager floats the shares of his firm on a myopic stock market, or a social security institution must propose contracts that are acceptable by the current active population. In these circumstances, we study the shape of the investment decision, the dynamics of accumulation, and the long-run steady-state. In particular, we characterize situations where the short horizons of the agents have a dramatic effect and lead to the closure of the firm or the demise of the social security system.
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  • Demange, Gabrielle & Laroque, Guy, 1998. "Long-sighted principal and myopic agents," Journal of Mathematical Economics, Elsevier, vol. 30(2), pages 119-146, September.
  • Handle: RePEc:eee:mateco:v:30:y:1998:i:2:p:119-146

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    References listed on IDEAS

    1. Futia, Carl A, 1982. "Invariant Distributions and the Limiting Behavior of Markovian Economic Models," Econometrica, Econometric Society, vol. 50(2), pages 377-408, March.
    2. Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
    3. Carl Futia, 2010. "Invariant Distributions and the Limiting Behavior of Markovian Economic Models," Levine's Working Paper Archive 497, David K. Levine.
    4. Hopenhayn, Hugo A & Prescott, Edward C, 1992. "Stochastic Monotonicity and Stationary Distributions for Dynamic Economies," Econometrica, Econometric Society, vol. 60(6), pages 1387-1406, November.
    5. Schechtman, Jack & Escudero, Vera L. S., 1977. "Some results on "an income fluctuation problem"," Journal of Economic Theory, Elsevier, vol. 16(2), pages 151-166, December.
    6. Brock, William A & Mirman, Leonard J, 1973. "Optimal Economic Growth and Uncertainty: The No Discounting Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 560-573, October.
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