Journal article
Repeated Games With Present-Biased Preferences
Year:
2008Published in:
Economic TheoryInfinitely Repeated Games
Equilibrium Payoffs
Present-Time Bias
We study infinitely repeated games with perfect monitoring, where players have β–δ 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 β or δ. Finally, we show how the equilibrium payoff set is contained in that of a repeated game with smaller discount factor.