Group for Research in Decision Analysis

Cooperation in a differential game with heterogeneous time preferences

Jesús Marín Solano Universitat de Barcelona, Spain

Cooperative solutions in common property resource games with heterogeneous agents are studied. If players have different discount rates, the optimal solution maximizing the sum of intertemporal utilities becomes time-inconsistent. If attention is restricted to subgame perfect solutions, it is shown that they can be strongly inefficient: the sum of payoffs can be higher is cooperation or coordination is forbidden than if it is allowed. Possible solutions to address this problem are presented. The introduction of (non-necessarily constant) weights for players in the coalition could be useful in solving the inefficiency.

Free entrance.
Welcome to everyone!