Repeated Games with Present-Biased Preferences

Hector Chade, Pavlo Prokopovych and Lones Smith

Working Papers from Department of Economics, W. P. Carey School of Business, Arizona State University

Abstract:

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.

New Economics Papers: this item is included in nep-gth
References: Add references at CitEc
Citations:

Downloads: (external link)
http://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/cps2.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/cps2.pdf [301 Moved Permanently]--> https://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/cps2.pdf)

Related works:
Journal Article: Repeated games with present-biased preferences (2008)
Working Paper: Repeated Games with Present-Biased Preferences (2006)
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:asu:wpaper:2173938

Access Statistics for this paper

More papers in Working Papers from Department of Economics, W. P. Carey School of Business, Arizona State University Contact information at EDIRC.
Bibliographic data for series maintained by Steve Salik ( this e-mail address is bad, please contact ).