General equilibrium dynamics with naïve and sophisticated hyperbolic consumers in an overlapping generations economy
Using an overlapping generations model, this paper describes interactions between naïve and sophisticated hyperbolic discounters in general equilibrium. The naïfes, who overestimate their future propensity to save and hence over-forecast the future equilibrium asset prices, are exploited through capital transactions by sophisticates, who correctly forecast the future asset prices by incorporating the naïfes' mis-forecasts. Due to the capital losses, the naïfe fall into bankruptcy when they are highly present-biased, highly patient, and having a low population density. Under generous conditions, the equilibrium is shown to be globally stable and Pareto inefficient in the ex-post sense.
Year of publication: |
2013
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Authors: | Ojima, Takeshi |
Publisher: |
Osaka : Osaka University, Institute of Social and Economic Research (ISER) |
Subject: | Bankruptcy | Hyperbolic discounting | Naïf | Sophisticate | General equilibrium |
Saved in:
freely available
Series: | ISER Discussion Paper ; 886 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 768429102 [GVK] hdl:10419/92720 [Handle] |
Classification: | D51 - Exchange and Production Economies ; D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving |
Source: |
Persistent link: https://www.econbiz.de/10010332342