CRRA utility and the sustainability of cooperation in infinitely-repeated games

Collie, David R. ORCID: https://orcid.org/0000-0002-3132-648X 2022. CRRA utility and the sustainability of cooperation in infinitely-repeated games. Economics Letters 221 , 110897. 10.1016/j.econlet.2022.110897

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Abstract

In a symmetric infinitely-repeated game, where players have constant relative risk aversion (CRRA), or constant elasticity of intertemporal substitution, utility functions, it is shown that the critical discount factor required to sustain full cooperation is decreasing in the coefficient of relative risk aversion (increasing in the elasticity of intertemporal substitution). An application to cooperation in international environmental agreements (IEA) is presented and it is shown that the limit of the critical discount factor as the number of countries goes to infinity is equal to one (zero) if the coefficient of intertemporal inequality aversion is less (greater) than one.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0165-1765
Date of First Compliant Deposit:	31 October 2022
Date of Acceptance:	21 October 2022
Last Modified:	05 May 2023 15:14
URI:	https://orca.cardiff.ac.uk/id/eprint/153829

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