Work

Markov perfect equilibria in stochastic growth models with quasi-hyperbolic discounting and risk-sensitive preferences

Year: 2025

Type: article

Abstract: We show the existence of a Markov perfect equilibrium in a non-stationary stochastic growth model with quasi-hyperbolic discounting and risk-sensitive preferences. Our proof resembles dynamic programming approach and does not involve any fixed point theorem. The risk-sensitive preferences are modelled via certainty equivalents for various utility functions including these implying risk-aversion as well as risk-seeking. Under the additional assumption of stationarity, we are able to prove the existence of a stationary Markov perfect equilibrium using the Schauder fixed point theorem.

Source: Dynamic Games and Applications

DOI: 10.1007/s13235-025-00683-x

Authors: Łukasz Balbus, Anna Jaśkiewicz, Andrzej S. Nowak, Łukasz Woźny

Institutions: University of Zielona Góra, Wrocław University of Science and Technology, SGH Warsaw School of Economics

Language: English

Topic: Economic theories and models

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,290

Funder: Narodowe Centrum Nauki