|
on Microeconomics |
| By: | Kfir Eliaz; Ran Spiegler |
| Abstract: | We formalize the argument that political disagreements can be traced to a "clash of narratives". Drawing on the "Bayesian Networks" literature, we model a narrative as a causal model that maps actions into consequences, weaving a selection of other random variables into the story. An equilibrium is defined as a probability distribution over narrative-policy pairs that maximizes a representative agent's anticipatory utility, capturing the idea that public opinion favors hopeful narratives. Our equilibrium analysis sheds light on the structure of prevailing narratives, the variables they involve, the policies they sustain and their contribution to political polarization. |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1811.04232&r=all |
| By: | Yeon-Koo Che; Konrad Mierendorff |
| Abstract: | We consider a decision maker (DM) who, before taking an action, seeks information by allocating her limited attention dynamically over different news sources that are biased toward alternative actions. Endogenous choice of information generates rich dynamics: The chosen news source either reinforces or weakens the prior, shaping subsequent attention choices, belief updating, and the final action. The DM adopts a learning strategy biased toward the current belief when the belief is extreme and against that belief when it is moderate. Applied to consumption of news media, observed behavior exhibits an `echo-chamber' effect for partisan voters and a novel `anti echo-chamber' effect for moderates. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.06967&r=all |
| By: | Simon Grant (Australian National University); Meng-Yu Liang (Institute of Economics, Academia Sinica, Taipei, Taiwan); Sung-Lin Hsieh (Department of Economics, University of Michigan) |
| Abstract: | In Gul and Pesendorfer (2001), a decision-maker, when facing a choice among menus, evaluates each menu in terms of the maximum value of its normative utility net of self-control costs. This paper extends the model such that this maximum is constrained by the condition that the cost of self-control cannot exceed the decision-makerís stock of willpower w. In our characterization, choices within menus that satisfy the weak axiom of revealed preferences (WARP) reveal a constant trade-off between normative and temptation utilities. However, it is the discontinuity of preferences over menus (along with violations of WARP for choices within menus) that reveals w (measured in units of temptation utility), allowing for a behaviorally meaningful comparative measure of self-control across individuals. |
| Keywords: | : temptation, self-control, willpower |
| JEL: | D81 D91 D11 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:sin:wpaper:18-a009&r=all |
| By: | Nobuo Koida (Faculty of Policy Studies, Iwate Prefectural University) |
| Abstract: | The objective of this study is to unify two major approaches for addressing uncertainty, namely, indecisiveness and preference for flexibility. Specifically, we assume preferences over alternatives and over menus as primitives, and axiomatize a joint representation of expected multi-utility (Dubra et al. 2004) and ordinal expected utility (Dekel et al. 2001), wherein the set of utility functions in the former is equivalent to the subjective state space in the latter. This result indicates that indecisiveness and preference for flexibility arise from the common underlying uncertainty about ex post tastes, that is, the subjective state space, albeit they may appear differently. Our key axiom is dominance consistency, which requires that the addition of an alternative to a menu strictly improves the menu evaluation if and only if the alternative is undominated by the menu. The main result can be extended to a specific class of ordinal expected utility, such as the additive representation. The relationship between the preference over alternatives and the commitment ranking, and the one-directional implications of dominance consistency, are also discussed. |
| Keywords: | uncertainty, indecisiveness, preference for flexibility, subjective state space, dominance consistency |
| JEL: | D81 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:989&r=all |
| By: | Pierpaolo Battigalli; Fabrizio Panebianco; Paolo Pin |
| Abstract: | Consider a set of agents who play a network game repeatedly. Agents may not know the network. They may even be unaware that they are interacting with other agents in a network. Possibly, they just understand that their payoffs depend on an unknown state that in reality is an aggregate of the actions of their neighbors. Each time, every agent chooses an action that maximizes her subjective expected payoff and then updates her beliefs according to what she observes. In particular, we assume that each agent only observes her realized payoff. A steady state of such dynamic is a selfconfirming equilibrium given the assumed feedback. We characterize the structure of the set of selfconfirming equilibria in network games and we relate selfconfirming and Nash equilibria. Thus, we provide conditions on the network under which the Nash equilibrium concept has a learning foundation, despite the fact that agents may have incomplete information. In particular, we show that the choice of being active or inactive in a network is crucial to determine whether agents can make correct inferences about the payoff state and hence play the best reply to the truth in a selfconfirming equilibrium. We also study learning dynamics and show how agents can get stuck in non--Nash selfconfirming equilibria. In such dynamics, the set of inactive agents can only increase in time, because once an agent finds it optimal to be inactive, she gets no feedback about the payoff state, hence she does not change her beliefs and remains inactive. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.11775&r=all |
| By: | Brice Magdalou |
| Abstract: | We establish an equivalence theorem between (i) dominance of one society by another, according to a finite sequence of social welfare improving transfers and (ii) dominance according to a class of social welfare functions, in the following framework: individual outcomes are multidimensional but finitely divisible in each dimension, a distribution simply counts the number of individuals having each possible outcome, and the considered set of transfers has the structure of a discrete cone. This framework encompasses most of the social welfare improving transfers investigated in the literature such as, for instance, Pigou-Dalton progressive transfers. As by-products, our model sheds new light on some surprising results in the literature on social deprivation, and provides new arguments on the key role of the expected utility model in decision-making under risk.. |
| Keywords: | social welfare, inequality, welfare-improving transfers, stochastic dominance |
| JEL: | C02 D63 D81 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpceem:18-13&r=all |
| By: | Gretschko, Vitali; Mass, Helene |
| Abstract: | Bidding in first-price auctions crucially depends on the beliefs of the bidders about their competitors' willingness to pay. We analyze bidding behavior in a first-price auction in which the knowledge of the bidders about the distribution of their competitors' valuations is restricted to the support and the mean. To model this situation, we assume that under such uncertainty a bidder will expect to face the distribution of valuations that minimizes her expected utility, given her bid is an optimal reaction to the bids of her competitors induced by this distribution. This introduces a novel way to endogenize beliefs in games of incomplete information. We find that for a bidder with a given valuation her worst-case belief just puts sufficient probability weight on lower valuations of her competitors to induce a high bid. At the same time the worst-case belief puts as much as possible probability weight on the same valuation in order to minimize the bidder's winning probability. This implies that even though the worst-case beliefs are type dependent in a non-monotonic way, an efficient equilibrium of the first-price auction exists. |
| Keywords: | auctions,mechanism design,beliefs,uncertainty |
| JEL: | D44 D81 D82 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:18056&r=all |
| By: | Takaomi Notsu (Graduate School of Economics, Kyoto University) |
| Abstract: | In this paper, we study full collusion (total payoff maximization) in the repeated Bertrand duopoly with capacity constraints. Instead of a standard rationing rule, Efficient rule (E rule), we introduce a sales maximization rationing rule. Under this rule, when the demand of a firm with a lower price exceeds its capacity, the consumers who are willing to buy at that price are rationed to that firm according to their unwillingness to buy. Then, we investigate whether the full collusion can be sustained or not by an equilibrium under our rule. We have four main results. First, we find that unless each firm's capacity is too large, an asymmetric price pair maximizes one shot total payoffs and the maximum total payoff is strictly greater than the one under E rule. Second, we explicitly find a minimum discount factor under which the full collusion can be sustained along a simple path such that the firms alternate two asymmetric price pairs. Third, we find that there exists a range of capacity constraints within which the minimum discount factors above which the full collusion can be sustained are lower under our rule than under E rule. This implies that the payoff of the full collusion, which is greater than under E rule, can be sustained within a wider range of discount factors rather than under E rule. Fourth and finally, we show that there exists the interior optimal capacity which maximizes the total payoffs of the full collusion, and the total payoff is strictly greater than the profit of a monopolist with aggregate capacities. This implies that sufficiently patient rms intend to reduce their capacities to just the optimal level when they have extra capacities, and that each middle-size firm prefers to be independent, instead of being horizontally integrated. |
| Keywords: | Repeated Bertrand oligopoly, Capacity constraints, Collusion, Sales maximization rule, Simple alternating path, Size of firm |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:990&r=all |
| By: | Herweg, Fabian (University of Bayreuth); Schmidt, Klaus (LMU Munich) |
| Abstract: | We consider a multi-dimensional procurement problem in which sellers have private information about their costs and about a possible design flaw. The information about the design flaw is necessarily correlated. We solve for the optimal Bayesian procurement mechanism that implements the efficient allocation under the constraint that sellers are protected by limited liability. We show that the rents obtained from reporting costs truthfully can be used to reduce the rents sellers must get for reporting the flaw. We compare the optimal Bayesian mechanism to the optimal ex post incentive compatible mechanism that is informationally less demanding. |
| Keywords: | auctions; correlated types; inefficient renegotiation; multidimensional screening; procurement; ; |
| JEL: | D44 D82 H57 |
| Date: | 2018–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:133&r=all |
| By: | Tsakas, Elias (General Economics 1 (Micro)) |
| Keywords: | belief elicitation, Karni mechanism, obvious dominance |
| JEL: | C90 C91 D81 D82 D83 |
| Date: | 2019–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2019001&r=all |
| By: | van Leeuwen, Boris (Tilburg University, Center For Economic Research); Offerman, T.J.S. (Tilburg University, Center For Economic Research); van de Ven, J. (Tilburg University, Center For Economic Research) |
| Abstract: | We study a dynamic game in which players compete for a prize. In a waiting game with two-sided private information about strength levels, players choose between fighting, fleeing, or waiting. Players earn a “deterrence value” on top of the prize if their opponent escapes without a battle. We show that this value is a key determinant of the type of equilibrium. For intermediate values, sorting takes place with weaker and more loss averse players fleeing before others fight. Time then helps to reduce battles. In an experiment, we find support for the key theoretical predictions, and document suboptimal predatory fighting. |
| Keywords: | fight-or-flight; contest; sorting; loss aversion; theory; experiment |
| JEL: | D74 D82 C92 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:ed32885c-3183-4eff-a0ff-7307d0bb0cf8&r=all |
| By: | Berliant, Marcus; Gouveia, Miguel |
| Abstract: | The literatures dealing with voting, optimal income taxation, implementation, and pure public goods are integrated here to address the problem of voting over income taxes and public goods. In contrast with previous articles, general nonlinear income taxes that affect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abilities of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is infinite dimensional, conditions on primitives are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to finance it. |
| Keywords: | Voting; Income taxation; Public good |
| JEL: | D72 D82 H21 H41 |
| Date: | 2018–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:90488&r=all |
| By: | Natalia Lazzati; John K.-H. Quah; Koji Shirai (School of Economics, Kwansei Gakuin University) |
| Abstract: | We develop a nonparametric approach to test for monotone behavior in optimizing agents and to make out-of-sample predictions. Our approach could be applied to simultaneous games with ordered actions, with agents playing pure strategy Nash equilibria or Bayesian Nash equilibria. We require no parametric assumptions on payoff functions nor distributional assumptions on the unobserved heterogeneity of agents. Multiplicity of optimal solutions (or equilibria) is not excluded, and we are agnostic about how they are selected. To illustrate how our approach works, we include an empirical application to an IO entry game. |
| Keywords: | revealed preference; monotone comparative statics; single crossing differences;supermodular games; entry games |
| JEL: | C1 C6 C7 D4 L1 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:184&r=all |
| By: | Takayuki Ogawa (Faculty of Economics, Osaka University of Economics); Jun Sakamoto (Graduate School of Economics, Osaka University) |
| Abstract: | This paper explores the welfare implications of mitigating investment uncertainty in the context of Easley and O fHara (2009) [Ambiguity and Nonparticipation: The Role of Regulation. Review of Financial Studies 22(5), 1817-1843]. While one may expect welfare gains to be had by encouraging participation in financial markets by ambiguity-averse investors, we formally show that it hurts other investors and is not Pareto-improving without appropriate income transfers. |
| Keywords: | Ambiguity, Heterogenous agents, Uncertainty, Welfare effects |
| JEL: | D81 G11 G18 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1833r&r=all |
| By: | Peter Caradonna |
| Abstract: | We characterize those abstract choice problems for which the satisfaction of the weak axiom of revealed preference su ces for the strong rationalizability of any choice correspondence. Roughly, this requires that all circuits on a certain graph de ned from the budget collection of the choice problem are able to be broken in an intuitive way. The condition is non-monotone, and is satis ed by both very small and very large budget collections. We additionally provide a notion of local integrability for an abstract choice correspondence, and prove an ordinal variant of the Hurwicz-Uzawa integrability theorem. We fully characterize how complete the domain of a choice correspondence must be for the weak axiom and local integrability to jointly guarantee strong rationalizability. |
| Keywords: | Revealed Preference, Choice Theory, Integrability, Rationalizability, Experiments |
| Date: | 2018–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~18-18-22&r=all |
| By: | Junkee Jeon; Hyeng Keun Koo; Kyunghyun Park |
| Abstract: | We study a finite horizon optimal contracting problem of a risk-neutral principal and a risk-averse agent who receives a stochastic income stream when the agent is unable to make commitments. The problem involves an infinite number of constraints at each time and each state of the world. Miao and Zhang (2015) have developed a dual approach to the problem by considering a Lagrangian and derived a Hamilton-Jacobi-Bellman equation in an infinite horizon. We consider a similar Lagrangian in a finite horizon, but transform the dual problem into an infinite series of optimal stopping problems. For each optimal stopping problem we provide an analytic solution by providing an integral equation representation for the free boundary. We provide a verification theorem that the value function of the original principal's problem is the Legender-Fenchel transform of the integral of the value functions of the optimal stopping problems. We also provide some numerical simulation results of optimal contracting strategies |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.11669&r=all |
| By: | Jan Christoph Schlegel |
| Abstract: | We study conditions for the existence of stable and group-strategy-proof mechanisms in a many-to-one matching model with contracts if students' preferences are monotone in contract terms. We show that "equivalence", properly defined, to a choice profile under which contracts are substitutes and the law of aggregate holds is a necessary and sufficient condition for the existence of a stable and group-strategy-proof mechanism. Our result can be interpreted as a (weak) embedding result choice functions under which contracts are observable substitutes and the observable law of aggregate demand holds. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.10326&r=all |
| By: | Takao Asano (Okayama University); Hiroyuki Kojima (Teikyo University) |
| Abstract: | By proposing the notions of upper-constrained dynamic consistency and lower-constrained dynamic consistency that are weaker axioms than dynamic consistency, this paper axiomatizes the Dempster-Shafer updating rule and naive Bayes' updating rule within the framework of Choquet expected utility. Based on the notion of conditional comonotonicity, this paper also provides an axiomatization of consequentialism under Choquet expected utility. Fur- thermore, based on the idea of the mean preserving rule, this paper provides a unified approach for distinguishing capacity updating rules (the Dempster- Shafer updating rule, naive Bayes' updating rule, and Fagin-Halpern updating rule) according to the degree of dynamic consistency. |
| Keywords: | Dynamic Consistency, Consequentialism, Choquet Expected Utility, Conditional Comonotonicity, Conditional Preferences, Dempster-Shafer Updating Rule, Naive Bayes' Updating Rule, Fagin-Halpern Updating Rule |
| JEL: | C71 D81 D90 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:987&r=all |
| By: | Zhengqing Gui; Ernst-Ludwig von Thadden; Xiaojian Zhao |
| Abstract: | We characterize an optimal financial contract when the firm’s realized cash flow is unobservable to the investor and the firm’s collateral can only be liquidated partially by resorting to the services of a costly third party. An optimal contract may exhibit a piecewise structure and vary with the liquidation cost and the firm’s actual liquidity shortage. Partial liquidation and wholesale transfers of collateral can coexist in an optimal contract. In contrast to part of the literature, the incentive-compatibility constraint incorporates the firm’s limited liability, and may be slack at the optimum. Allowing the firm to overcome an ex-post liquidity shortage by borrowing surreptitiously from a third party may reduce the firm’s ex-ante expected utility. |
| Keywords: | Financial contracting, incentive-compatibility, limited liability, indivisible collateral, costly liquidation |
| JEL: | D86 G33 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_064_2018&r=all |
| By: | Antoine Mandel (Paris School of Economics - Centre d'Economie de la Sorbonne); Xavier Venel (Paris School of Economics - Centre d'Economie de la Sorbonne) |
| Abstract: | There exists a wide gap between the predictions of strategic models of network formation and empirical observations of the characteristics of socio-economic networks. Empirical observations underline a complex structure characterized by fat-tailed degree distribution, short average distance, large clustering coefficient and positive assortativity. Game theoretic models offer a detailed representation of individuals' incentives but they predict the emergence of much simpler structures than these observed empirically. Random network formation processes, such as preferential attachment, provide a much better fit to empirical observations but generally lack micro-foundations. in order to bridge this gap, we propose to model network formation as extensive games and investigate under which conditions equilibria of these games are observationally equivalent with random network formation process. In particular, we introduce a class of games in which players compete with their predecessors and their successors for the utility induced by the links they form with another node in the network. Such sequential competition games can represent a number of strategic economic interactions such as oligopolistic competition in supply networks or diffusion of influence in opinion networks. we show that the focal equilibrium that emerge in this setting is one where players use probability distributions with full support and target the whole network with probabilities inversely proportional to the utility of each node. Notably, when the utility of a node is inversely proportional to its degree, equilibrium play induces a preferential attachment process |
| Keywords: | Socio-economic networks; endogenous network formation; game theory |
| JEL: | C71 D85 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:18035&r=all |
| By: | Salgado Alfredo |
| Abstract: | We analyze a college admissions game with asymmetric information between students and colleges. Students' preferences for colleges depend on the observable quality of the schools. In contrast, colleges' preferences for students depend on the latter's abilities, which are private information. Students and schools are matched via a decentralized mechanism in which students signal their abilities with costly observable signals. A closed-form symmetric separating equilibrium of this game that depends on the supply of and demand for schools seats and on college quality is characterized. In this equilibrium, an increase in the number of students, a reduction in the number of school seats or a drop in the quality of schools reduce the incentive of low-ability students to invest in signaling and increase it for high-ability students. |
| Keywords: | College Admissions;Decentralized Mechanisms;Incomplete Information;Coordination Problems;Costly Signaling |
| JEL: | D82 C70 C71 C72 C78 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2018-23&r=all |
| By: | Andrew Mackenzie (Department of Economics, Maastricht University); Christian Trudeau (Department of Economics, University of Windsor) |
| Abstract: | We investigate mechanisms in a class of production environments where each group of agents can `win' for an associated monetary cost; examples include the allocation of an indivisible object and the provision of a pure public good. A mechanism is satisfactory if and only if it is surplus-maximizing and honesty is necessarily a dominant strategy for each agent; it is autonomous if and only if it is satisfactory and production is funded through voluntary contributions of the agents; it is equitable if and only if it is satisfactory and no agent prefers another's bundle to his own. First, we introduce the notion of inclusion cost coverage for cost functions, and prove that this condition is necessary and sufficient for the existence of autonomous mechanisms (Theorem 1). Second, we prove that the cost function is symmetric and convex if and only if there are equitable mechanisms (Theorem 2); in this case, we characterize both the class of equitable mechanisms (Theorem 3) as well as the class of autonomous and equitable mechanisms (Theorem 4). We discuss a variety of applications and additional topics. |
| Keywords: | game theory; second price auction, free-rider problem, pivot mechanism, Walrasian price, production. |
| JEL: | D82 D61 H41 D44 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1901&r=all |
| By: | Lars Tyge Nielsen |
| Abstract: | This paper provides an existence-and-uniqueness theorem characterizing the stochastic integral with respect to a Wiener process. The integral is represented as a mapping from the space of measurable and adapted pathwise locally integrable processes to the space of continuous adapted processes. It is characterized in terms of two properties: (1) how the stochastic integrals of simple processes are calculated and (2) how these integrals converge in probability when the time integrals of the squared integrands converge in probability. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.09637&r=all |
| By: | Bourreau, Marc; Lestagey, Romain |
| Abstract: | We introduce a model of asymmetric competition where two network operators with different investment costs may build an internet access infrastructure and where a virtual operator provides services through third-party access. We show that the virtual operator requests access from the low cost network operator, because it reduces the geographical area where both network operators build an infrastructure. We also show that potential entry of a virtual operator increases welfare if the access price and the cost asymmetry between the network operators is high enough. Finally, regardless of whether a virtual operator is allowed to enter the market or not, standard access regulation leads to broader infrastructure coverage than co-investment if and only if the profit of a network operator that builds a monopolistic infrastructure is higher than the total profit two network operators that both invest. |
| Keywords: | Next generation networks,Access obligations,Asymmetric competition |
| JEL: | L96 L51 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190375&r=all |
| By: | Stephan Lauermann; Asher Wolinsky |
| Abstract: | This paper analyzes a common-value, first-price auction with state-dependent participation. The number of bidders, which is unobservable to them, depends on the true value. For exogenously given participation patterns that involve many bidders in each state, the bidding equilibrium may be of a "pooling" type---with high probability, the winning bid is the same across states and is below the ex-ante expected value---or of a "partially separating" type---with no significant atoms in the winning bid distribution and an expected winning bid increasing in the true value. Which of these forms will arise is determined by the likelihood ratio at the top of the signal distribution and the participation across states. When the state-dependent participation is endogenized as the strategic solicitation by an informed seller who bears a small cost for each solicited bidder, an equilibrium of the separating type always exists and is unique of this type; for certain signal distributions there also exist equilibria of the pooling type. |
| Keywords: | Search, Auctions, Adverse Selection |
| JEL: | C78 D83 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_063_2018&r=all |
| By: | Jean-Pierre Drugeon (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Bertrand Wigniolle (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This article considers the long-run equilibrium distribution of an economy populated by heterogenous and present biased quasi-hyperbolic discounting agents. In a first configuration with logarithmic utility functions and Cobb-Douglas production technologies, this article establishes the existence and the uniqueness of the equilibrium: only one agent, determined by the highest value of a coefficient building from both the degree of present bias and the rate of discount, will have a positive long-run consumption and a positive long-run wealth. A second configuration with constant elasticities of substitution utilities and linear production technologies is then considered. This article similarly establishes the existence and the uniqueness of the equilibrium. There is generically a unique agent with the highest growth rate for his consumption and his wealth. This agent is determined by both preferences and technology parameters and may change following a technological shock. |
| Keywords: | Heterogeneities,quasi-hyperbolic discounting,linear decision rules |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01962004&r=all |