Intertemporal Hedging and Trade in Repeated Games with Recursive Utility

Arbeitspapier

Recursive preferences have found widespread application in representative-agent asset-pricing models and general equilibrium. A majority of these applications exploit two decision-theoretic properties not shared by the standard model of intertemporal choice: (i) agents care about the intertemporal distribution of risk and (ii) rates of time preference, rather than being exogenously fixed, may vary with the level of consumption. We investigate what these features imply in the context of a repeated strategic interaction. Specifically, we identify novel opportunities for the players to manage risk and trade intertemporally, and characterize when such opportunities lead to an expansion of the feasible set of payoffs. Sharp implications for equilibrium behavior and the folk theorem are also deduced.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 361

Classification and Topics

• Classification: Wirtschaft
• Subject: recursive utility ; repeated games ; correlation aversion ; endogenous discounting ; intertemporal trade ; intertemporal hedging

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kochov, Asen ; Song, Yangwei
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
• (where): München und Berlin
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/282053
• Last update: 10.03.2025, 11:44 AM CET