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Strategic Growth with Recursive Preferences: Decreasing Marginal Impatience

Luis Alcalá (), Fernando Tohmé () and Carlos Dabús ()
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Carlos Dabús: Universidad Nacional del Sur-CONICET

Dynamic Games and Applications, 2019, vol. 9, issue 2, No 2, 314-365

Abstract: Abstract This paper studies a two-agent strategic model of capital accumulation with heterogeneity in preferences and income shares. Preferences are represented by recursive utility functions that satisfy decreasing marginal impatience. The stationary equilibria of this dynamic game are analyzed under two alternative information structures: one in which agents precommit to future actions, and another one where they use Markovian strategies. In both cases, we develop sufficient conditions to show the existence of these equilibria and characterize their stability properties. Under certain regularity conditions, a precommitment equilibrium shows monotone convergence of aggregate variables, but Markovian equilibria may exhibit nonmonotonic paths, even in the long-run.

Keywords: Recursive utility; Decreasing impatience; Dynamic programming; Precommitment strategies; Markovian strategies (search for similar items in EconPapers)
Date: 2019
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Working Paper: Strategic Growth with Recursive Preferences: Decreasing Marginal Impatience (2016) Downloads
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DOI: 10.1007/s13235-018-0269-3

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