On Myopic Equilibria in Dynamic Games with Endogenous Discounting

18 Pages Posted: 19 Jan 2007

See all articles by Wilko Bolt

Wilko Bolt

De Nederlandsche Bank (Dutch Central Bank); VU University Amsterdam

Alexander F. Tieman

International Monetary Fund (IMF)

Date Written: Janurary 2007

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, Loans, Economic models

JEL Classification: C72, C73, G21

Suggested Citation

Bolt, Wilko and Tieman, Alexander F., On Myopic Equilibria in Dynamic Games with Endogenous Discounting (Janurary 2007). IMF Working Paper No. 06/302. Available at SSRN: https://ssrn.com/abstract=958166

Wilko Bolt (Contact Author)

De Nederlandsche Bank (Dutch Central Bank) ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Alexander F. Tieman

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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