Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148186
Authors: 
Ojima, Takeshi
Year of Publication: 
2014
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 886
Abstract: 
Using an overlapping generations model, this paper describes interactions between naïve and sophisticated hyperbolic discounters in general equilibrium. The naïfs, 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 naïfs' mis-forecasts. Due to the capital losses, the naïfs fall into bankruptcy when they are highly present-biased, highly patient, and small in proportion. Under permissive conditions, the equilibrium is shown to be globally stable and Pareto inefficient in the ex-post sense.
Subjects: 
Bankruptcy
Hyperbolic discounting
Naïf
Sophisticate
General equilibrium
JEL: 
D51
D91
Document Type: 
Working Paper

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