Dynamic decision-making without commitment is usually modelled as a game between the current and future selves of the decision maker. It has been observed that if the time-horizon is infinite, then such games may have multiple subgame-perfect equilibrium solutions. We provide a sufficient condition for uniqueness in a class of such games, namely infinitely repeated decision problems with discounting. The condition is two-fold: the range of possible utility levels in the decision problem should be bounded from below, and the discount factor between successive periods should be non-decreasing over time, a condition met by exponential, quasi-exponential and hyperbolic discounting.
Working Paper No. 577
Uniqueness in Infinitely Repeated Decision Problems
Working Paper
Reference
Vieille, Nicolas and Jörgen W. Weibull (2002). “Uniqueness in Infinitely Repeated Decision Problems”. IFN Working Paper No. 577. Stockholm: Research Institute of Industrial Economics (IFN).
Vieille, Nicolas and Jörgen W. Weibull (2002). “Uniqueness in Infinitely Repeated Decision Problems”. IFN Working Paper No. 577. Stockholm: Research Institute of Industrial Economics (IFN).
Authors
Nicolas Vieille,
Jörgen W. Weibull