Continuous Markov Equilibria with Quasi-Geometric Discounting

Burcu Eyigungor and Satyajit Chatterjee (chatterjee.satyajit@gmail.com)

No 348, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: We prove that the standard quasi-geometric discounting model used in dynamic consumer theory and political economics does not possess continuous Markov Perfect equilibria if there is a strictly positive lower bound on wealth. We also show that at points of discontinuity, the decision maker strictly prefers lotteries over next period's assets. We then extend the standard model to have lotteries and establish the existence of a MPE with continuous decision rules. The model with and without lotteries are numerically compared and it is shown that the model with lotteries behaves more in accord with economic intuition.

Date: 2014
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2014/paper_348.pdf (application/pdf)

Related works:
Journal Article: Continuous Markov equilibria with quasi-geometric discounting (2016)
Working Paper: Continuous Markov equilibria with quasi-geometric discounting (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:348

Access Statistics for this paper

More papers in 2014 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann (chuichuiche@gmail.com).