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The Economic Research Institute, Stockholm School of Economics 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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