Doing it Now, Later, or Never

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Abstract

We study centipede games played by an infinite sequence of players. Following the literature on time-inconsistent preferences, we distinguish two types of decision makers, naive and sophisticated, and the corresponding solution concepts, naive epsilon-equilibrium and sophisticated epsilon-equilibrium. We show the existence of both naive and sophisticated epsilon-equilibria for each positive epsilon. Under the assumption that the payoff functions are upper semicontinuous, we furthermore show that there exist both naive and sophisticated 0-equilibria in pure strategies. We also compare the probability to stop of a naive versus a sophisticated decision maker and show that a sophisticated decision maker stops earlier. (C) 2016 Elsevier Inc. All rights reserved.

Original languageEnglish
Pages (from-to)174-185
Number of pages12
JournalGames and Economic Behavior
Volume97
DOIs
Publication statusPublished - May 2016

Keywords

  • Centipede games
  • Subgame perfect 6-equilibria
  • Time-inconsistent preferences
  • Upper semi-continuous functions
  • Sophisticated players
  • Naive players
  • PERFECT-INFORMATION GAMES
  • INCONSISTENT PREFERENCES
  • SEMICONTINUOUS PAYOFFS
  • EQUILIBRIUM
  • EXISTENCE
  • GROWTH
  • TIME

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