Robust Markov Perfect Equilibria in a Dynamic Choice Model with Quasi-hyperbolic Discounting

A stochastic dynamic choice model with the transition probability depending on an unknown parameter is specified and analysed in this chapter. The main feature in our model is an application of the quasi-hyperbolic discounting concept to describe the situation in which agent’s preferences may hinge on time. This requirement, in turn, leads to a non-cooperative infinite horizon stochastic game played by a countably many selves representing him during the play. As a result, we provide two existence theorems for a robust Markov perfect equilibrium (RMPE) and discuss its properties.

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