Repeated Games with Present-Biased Preferences
30 Pages Posted: 3 Oct 2007
We study infinitely repeated games with perfect monitoring, where players have beta-delta preferences. We compute the continuation payoff set using recursive techniques and then characterize equilibrium payoffs. We then explore the cost of the present-time bias, producing comparative statics. Unless the minimax outcome is a Nash equilibrium of the stage game, the equilibrium payoff set is not monotonic in beta or delta. Finally, we show how the equilibrium payoff set is contained in that of a repeated game with smaller discount factor.
Keywords: Hyperbolic discounting, quasi-geometric discounting, repeated games, admissibility, continuation values
JEL Classification: C73
Suggested Citation: Suggested Citation
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By Zafer Akin