On the feasible payoff set of two-player repeated games with unequal discounting

We provide a novel characterization of the feasible payo¤ set of a general two-player repeated game with unequal discounting. In particular, we show that generically the Pareto frontier shifts outwards and the feasible payo¤ set expands in the sense of set inclusion, as the time horizon increases. This result reinforces and re…nes the insight in Lehrer and Pauzner (1999) by showing that a longer horizon enables the players to conduct intertemporal trade in a more ‡exible fashion. Key Words: intertemporal trade, feasible payo¤ set, repeated game, unequal discounting ; JEL Classi…cation: C70, C72, C73.