• Media type: Report; E-Book
  • Title: General equilibrium dynamics with naïve and sophisticated hyperbolic consumers in an overlapping generations economy
  • Contributor: Ojima, Takeshi [Author]
  • Published: Osaka: Osaka University, Institute of Social and Economic Research (ISER), 2013
  • Language: English
  • Keywords: Naïf ; D91 ; General equilibrium ; Sophisticate ; Hyperbolic discounting ; D51 ; Bankruptcy
  • Origination:
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  • Description: 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. ; September 2013
  • Access State: Open Access