One area that is often overlooked by economists and social scientists is discounting. Most economic models of intertemporal choice make use of Samuelson’s (1937) DU model which leads to an exponential discount function. Divergences from what economic modelling predicts and empirical findings are on the most part attributed to factors other than the discount function employed. We review the lite...

We examine a variant of repeated Prisoner’s Dilemma whose stage game payoffs are subject to vary, and show that a payoff perturbation may strictly reduce the minimum discount factor to sustain mutual cooperation. JEL classification: C 73

The limit set of perfect public equilibrium payoffs of a repeated game as the discount factor goes to one is characterized, with examples, even when the full-dimensionality condition fails.

It is shown that the discount factor needed to solve an undiscounted mean payoff stochastic game to optimality is exponentially close to 1, even in games with a single random node and polynomially bounded rewards and transition probabilities.

Abstract This paper is concerned with the asymptotic analysis of infinite systems weakly coupled stationary Hamilton–Jacobi–Bellman equations as discount factor tends to zero. With a specific Hamiltonian, we show convergence solution and prove solvability corresponding ergodic problem.

We study a repeated game with payoff externalities and observable actions where two players receive information over time about an underlying payoff-relevant state, and strategically coordinate their actions. Players learn about the true state from private signals, as well as the actions of others. They commonly learn the true state (Cripps et al., 2008), but do not coordinate in every equilibr...

We consider the problem of policy optimization for a resource-limited agent with multiple timedependent objectives, represented as an MDP with multiple discount factors in the objective function and constraints. We show that limiting search to stationary deterministic policies, coupled with a novel problem reduction to mixed integer programming, yields an algorithm for finding such policies tha...

This paper is concerned with the relationship between the discount rate and the nature of long-run behavior in dynamic optimization models. The theory is developed under two conditions. The first is history independence, which rules out multiple limit sets. The second is a condition that avoids the reversion to a stable steady state, as the discount factor is lowered, once cycles have emerged. ...

Cash flows are often modeled using the random geometric growth model (geometric Brownian motion). One of the reasons for using this model is that it is simple to implement and it is a reasonable approximation to random growth cash flows such as stock prices. For this model the volatility of the cash flow grows multiplicatively over time. This multiplicative characteristic is shared by the usual...

We study a framework where two duopolists compete repeatedly in prices and where chosen prices potentially affect future market shares, but certainly do not affect current sales. This assumption of consumer inertia causes (noncooperative) coordination on high prices only to be possible as an equilibrium for low values of the discount factor. In particular, high discount factors increase opportu...