Folk Theorems for Present-Biased Players

Axel Bernergård ()
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Axel Bernergård: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

No 736, Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: The folk theorems for infinitely repeated games with discounting presume that the discount rate between two successive periods is constant. Following the literature on quasi-exponential or hyperbolic discounting, I model the repeated interaction between two or more decision makers in a way that allows present-biased discounting where the discount factor between two successive periods increases with the waiting time until the periods are reached. I generalize Fudenberg and Maskin's (1986) and Abreu, Dutta and Smith's (1994) folk theorems for repeated games with discounting so that they apply when discounting is present-biased. Patience is then represented either by the discount factor between the next and the current period or, alternatively, by the sum of the discount factors for all future periods.

Keywords: folk theorem; present-biased; discounting; hyperbolic (search for similar items in EconPapers)
JEL-codes: C73 (search for similar items in EconPapers)
Date: 2011-06-19
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