Title

Coordination with Differential Time Preferences: Experimental Evidence

Author(s)

Marina Agranov Marina Agranov (California Institute of Technology and NBER)

Jeongbin Kim Jeongbin Kim (Florida State University)

Leeat Yariv Leeat Yariv (Princeton University, CEPR, and NBER)

Abstract

The experimental literature on repeated games has largely focused on settings where players discount the future identically. In applications, however, interactions often occur between players whose time preferences differ. We study experimentally the effects of discounting differentials in infinitely repeated coordination games. In our data, differential discount factors play two roles. First, they provide a coordination anchor: more impatient players get higher payoffs first. Introducing even small discounting differentials reduces coordination failures significantly. Second, with pronounced discounting differentials, intertemporal trades are prevalent: impatient players get higher payoffs for an initial phase and patient players get higher payoffs in perpetuity afterward.

Creation Date

2023-09

Section URL ID

Paper Number

2023-10

URL

https://www.lyariv.com/papers/DiscountingExperiments.pdf

File Function

Jel

C73, C92, D15, D25

Keyword(s)

Repeated Games, Discounting, Intertemporal Trade, Experiments

Suppress

false

Series

13