IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Repeated Games with Present-Biased Preferences

We study infinitely repeated games with observable actions, where players have present-biased (so-called (beta)-(delta)) preferences. We give a two-step procedure to characterize Strotz-Pollak equilibrium payoffs: compute the continuation payoff set using recursive techniques, and use this set to characterize the equilibrium payoff set U(beta,delta). While Strotz-Pollak equilibrium and subgame perfection differ here, the generated paths and payoffs do coincide. We then explore the cost of the present-time bias. Fixing the total present value of 1 util flow, lower (beta) or higher (delta) shrinks the payoff set. Surprisingly, unless the minimax outcome is a Nash equilibrium of the stage game, the equilibrium payoff set U(beta, delta) is not monotonic in (beta) or (delta). While the set U(beta, delta) is contained in that of a standard repeated game with greater discount factor, the present-time bias precludes any lower bound on U(beta, delta) that would easily generalize the (beta) = 1 folk-theorem.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/cps2.pdf
Download Restriction: no

Paper provided by Department of Economics, W. P. Carey School of Business, Arizona State University in its series Working Papers with number 2173938.

as
in new window

Length:
Date of creation:
Date of revision:
Handle: RePEc:asu:wpaper:2173938
Contact details of provider: Postal:
Box 873806, Tempe, AZ 85287-3806

Phone: (480) 965-5514
Fax: (480) 965-0748
Web page: http://repec.wpcarey.asu.edu/RePEc/asu/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Per Krusell & Burhanettin Kuruscu & Anthony A. Smith Jr., 2001. "Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting," Temi di discussione (Economic working papers) 413, Bank of Italy, Economic Research and International Relations Area.
  2. R. A. Pollak, 1968. "Consistent Planning," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 201-208.
  3. Steven M. Goldman, 1980. "Consistent Plans," Review of Economic Studies, Oxford University Press, vol. 47(3), pages 533-537.
  4. Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1261-1303.
  5. Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
  6. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1990. "Toward a Theory of Discounted Repeated Games with Imperfect Monitoring," Econometrica, Econometric Society, vol. 58(5), pages 1041-63, September.
  7. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  8. Dilip Abreu & David Pearce & Ennio Stacchetti, 2010. "Towards a Theory of Discounted Repeated Games with Imperfect Monitoring," Levine's Working Paper Archive 199, David K. Levine.
  9. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
  10. R. H. Strotz, 1955. "Myopia and Inconsistency in Dynamic Utility Maximization," Review of Economic Studies, Oxford University Press, vol. 23(3), pages 165-180.
  11. Stefano DellaVigna & M. Daniele Paserman, 2004. "Job Search and Impatience," NBER Working Papers 10837, National Bureau of Economic Research, Inc.
  12. Bezalel Peleg & Menahem E. Yaari, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 391-401.
  13. Jonathan Gruber & Botond Koszegi, 2000. "Is Addiction "Rational"? Theory and Evidence," NBER Working Papers 7507, National Bureau of Economic Research, Inc.
  14. Dilip Abreu & David Pearce & Ennio Stacchetti, 1997. "Optimal Cartel Equilibria with Imperfect monitoring," Levine's Working Paper Archive 632, David K. Levine.
  15. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  16. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 185-199.
  17. Kocherlakota, Narayana R., 1996. "Reconsideration-Proofness: A Refinement for Infinite Horizon Time Inconsistency," Games and Economic Behavior, Elsevier, vol. 15(1), pages 33-54, July.
  18. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:asu:wpaper:2173938. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Steve Salik)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.