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On Myopic Equilibria in Dynamic Games with Endogenous Discounting

Wilko Bolt () and Alexander Tieman

No 06/302, IMF Working Papers from International Monetary Fund

Abstract: This paper derives an equilibrium for a competitive multi-stage game in which an agents' current action influences his probability of survival into the next round of play. This is directly relevant in banking, where a banks' current lending and pricing decisions determines its future probability of default. In technical terms, our innovation is to consider a multi-stage game with endogenous discounting. An equilibrium for such a multi-stage game with endogenous discounting has not been derived before in the literature.

Keywords: Banks; Economic models; Loans; dynamic game, myopic equlibrium, discounting, equilibrium selection, probability, equation, probabilities, present value, Noncooperative Games, Myopic Equilibrium, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hpe
Date: 2006-12-01
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Working Paper: On Myopic Equilibria in Dynamic Games with Endogenous Discounting (2005) Downloads
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