Template-Type: ReDIF-Paper 1.0 
Title: Time consistent equilibria in dynamic models with recursivepayoffs and behavioral discounting
Author-Name: Łukasz Balbus 
Author-Name: Kevin Reffett 
Author-Name: Łukasz Woźny 
Abstract: 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 applica-tions. Our generalized Bellman equation method identifies and separates both: recursive andstrategic aspects of the equilibrium problem and allows to precisely determine the sufficientassumptions on preferences and 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 andits 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.
Number: 2020-055
Length: 46 pages 
Creation-Date: 2020-11
Keywords: behavioral discounting, time consistency, markov equilibrium, existence, approximation, generalized Bellman equation, hyperbolic discountin, semi-hyperbolic discounting, quasi-hyperbolic discounting
Classification-JEL: C61, C73
File-URL: https://hdl.handle.net/20.500.12182/1108
File-Format: Application/pdf
DOI: 10.33119/kaewps2020055
Handle: RePEc:sgh:kaewps:2020055