Time consistent equilibria in dynamic models with recursive payoffs and behavioral discounting

Speaker(s)

Łukasz Woźny

Affiliation

SGH Warsaw School of Economics

Date

Dec. 2, 2020, 12:15 p.m.

Information about the event

Zoom Meeting https://us02web.zoom.us/j/83632151104?pwd=R25GeVZmVS9OWXprWDJBbm9FQ0h3dz09

Seminar

Seminar of Biomathematics and Game Theory Group

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We prove existence of time consistent equilibria in a wide class of dynamic models with recursive payoffs and generalized discounting involving both behavioral and normative applications. Our generalized Bellman equation method identifies and separates both: recursive and strategic aspects of the equilibrium problem and allows us to precisely determine the sufficient assumptions on a stochastic transition to establish existence. In particular we show existence of minimal state space stationary Markov equilibrium (a time-consistent solution) in a deterministic model of consumption-saving with beta-delta discounting and its generalized versions involving magnitude effects, non-additive payoffs, semi-hyperbolic or hyperbolic discounting (over possibly unbounded state and unbounded above reward space). We also provide an equilibrium approximation method for a hyperbolic discounting model.

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