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No 755:
Uniqueness in infinitely repeated decision problems

Nicolas VIEILLE and Jörgen W. WEIBULL

Abstract: 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 function should exhibit weakly increasing patience, that is, the ratio between the discount factors attached to periods t + 1 and t should be non-decreasing in t, a condition met by exponential, quasi-exponential and hyperbolic discounting.

Keywords: game theory; time preference; hyperbolic discounting; repeated decision problems; (follow links to similar papers)

JEL-Codes: C61; C72; C73; D90; (follow links to similar papers)

15 pages, April 16, 2002

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