SSE/EFI Working Paper Series in Economics and Finance
No 736:
Folk Theorems for Present-Biased Players
Axel Bernergård ()
Abstract: The folk theorems for infinitely repeated games with
discounting presume that the discount rate between two successive periods
is constant. Following the literature on quasi-exponential or hyperbolic
discounting, I model the repeated interaction between two or more decision
makers in a way that allows present-biased discounting where the discount
factor between two successive periods increases with the waiting time until
the periods are reached. I generalize Fudenberg and Maskin's (1986) and
Abreu, Dutta and Smith's (1994) folk theorems for repeated games with
discounting so that they apply when discounting is present-biased. Patience
is then represented either by the discount factor between the next and the
current period or, alternatively, by the sum of the discount factors for
all future periods.
Keywords: folk theorem; present-biased; discounting; hyperbolic; (follow links to similar papers)
JEL-Codes: C73; (follow links to similar papers)
24 pages, June 19, 2011
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