Markov perfect equilibria in OLG models with risk sensitive agents
Keywords
Overlapping generation models, recursive utility, non-paternalistic altruism, paternalistic altruism, risk sensitivity, local contractionsAbstract
In this paper, we present an overlapping generation model (OLG for short) of resource extraction with a random production function and an altruism having both paternalistic and non-paternalistic features. All generations are risk-sensitive with a constant coefficient of absolute risk aversion. The preferences are represented by a possibly dynamic inconsistent dynamic recursive utility function with non-cooperating generations. Under general conditions on the aggregator and transition probability, we examine the existence and the uniqueness of a recursive utility function and the existence of a stationary mixed Markov Perfect Nash Equilibria.References
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