CRRA utility and the sustainability of cooperation in infinitely-repeated games

David Collie

Economics Letters, 2022, vol. 221, issue C

Abstract: In a symmetric infinitely-repeated game, where players have constant relative risk aversion (CRRA), or constant elasticity of intertemporal substitution, utility functions, it is shown that the critical discount factor required to sustain full cooperation is decreasing in the coefficient of relative risk aversion (increasing in the elasticity of intertemporal substitution). An application to cooperation in international environmental agreements (IEA) is presented and it is shown that the limit of the critical discount factor as the number of countries goes to infinity is equal to one (zero) if the coefficient of intertemporal inequality aversion is less (greater) than one.

Keywords: Cooperation; Critical discount factor; Nash-reversion trigger strategies; CRRA utility function; International environmental agreement (search for similar items in EconPapers)
JEL-codes: C72 C73 Q58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176522003718
Full text for ScienceDirect subscribers only

Related works:
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:eee:ecolet:v:221:y:2022:i:c:s0165176522003718

DOI: 10.1016/j.econlet.2022.110897

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().