The Folk Theorem for Repeated Games with Time-Dependent Discounting

This paper defines a general framework to study infinitely repeated games with time-dependent discounting in which we distinguish and discuss both time-consistent and -inconsistent preferences. To study the long-term properties of repeated games, we introduce an asymptotic condition to characterize the fact that players become more and more patient; that is, the discount factors at all stages uniformly converge to one. Two types of folk theorems are proven without the public randomization assumption: the asymptotic one, that is, the equilibrium payoff set converges to the feasible and individual rational set as players become patient, and the uniform one, that is, any payoff in the feasible and individual rational set is sustained by a single strategy profile that is an approximate subgame perfect Nash equilibrium in all games with sufficiently patient discount factors. We use two methods for the study of asymptotic folk theorem: the self-generating approach and the constructive proof. We present the constructive proof in the perfect-monitoring case and show that it can be extended to time-inconsistent preferences. The self-generating approach applies to the public-monitoring case but may not extend to time-inconsistent preferences because of a nonmonotonicity result.

Organising Competition for the Market

We study competition for the market in a setting where incumbents (and, to a lesser extent, neighbouring incumbents) benefit from a cost or information advantage. We first compare the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find the timing of tenders interrelates with the likelihood of monopolisation. For high incumbency advantages and/or discount factors monopolisation is expected, in which case synchronous tendering is preferable as it strengthens the pressure that entrants exercise on the monopolist. For low incumbency advantages and/or discount factors other firms remain active, in which case staggered tendering is preferable as it maximises competitive pressure coming from the other firms. We use bus tendering in London to illustrate our insights and draw policy implications.

Do Investment-Based Models Explain Equity Returns? Evidence from Euler Equations

We investigate the empirical implications of the investment-based model of asset pricing for the Hansen-Jagannathan and Kozak-Nagel-Santosh discount factors in the linear span of equity returns. We find that the stochastic discount factors satisfying the Euler equation for equity returns cannot satisfy the Euler equation for investment returns because returns on corporate investment covary inversely with the sources of equity risk relative to returns on equity. As a result, the model fails to replicate the level of the risk premium. Our results suggest that joint restrictions on the optimality of investment and consumption pose stringent conditions for candidate production models.

Data-Driven Forgetting and Discount Factors for Vehicle Speed Forecasting in Ecological Adaptive Cruise Control

This paper investigates temporal correlations in human driving behavior using real-world driving to improve speed forecasting accuracy. These correlations can point to a measurement weighting function with two parameters: a forgetting factor for past speed measurements that the vehicle itself drove with, and a discount factor for the speeds of vehicles ahead based on information from vehicle-to-vehicle communication. The developed weighting approach is applied to a vehicle speed predictor using polynomial regression, a prediction method well-known in the literature. The performance of the developed approach is then assessed in both real-world and simulated traffic scenarios for accuracy and robustness. The new weighting method is applied to an ecological adaptive cruise control system, and its influence is analyzed on the prediction accuracy and the performance of the ecological adaptive cruise control in an electric vehicle powertrain model. The results show that the new prediction method improves energy saving from the eco-driving by up to 4.7% compared to a baseline least-square-based polynomial regression. This is a 10% improvement over the constant speed/acceleration model, a conventional speed predictor.

Economic Analysis and Generic Algorithm for Optimizing the Investments Decision-Making Process in Oil Field Development

Due to the substantial amounts of money involved and the complex interactions of a number of different factors, managers of oil and gas companies are faced with significant challenges when making investment decisions that will increase business efficiency and achieve competitive advantages, especially through cost control. Due to the various uncertainties of the current period, optimal investment strategies are difficult to determine. Thus, through an economic analysis that includes data analysis, quantitative risk analysis scenarios, modelling and simulations, a work framework, in the form of a generic algorithm, is proposed with the aim of generating a complex procedure for optimizing investment decisions in oil field development. A complex set of elements is considered in the analysis: costs (operational expenditures (OPEX) and capital expenditures (CAPEX), daily drilling rig costs), prices (oil, gas, separation and water injection preparation), production profiles, different types of taxes and discount factors. Above all, oil price volatility plays an essential role and creates uncertainty in relation to profitability and the strategic investment decisions made by oil exploration and production companies.

Complementarity Modeling of a Ramsey-Type Equilibrium Problem with Heterogeneous Agents

We contribute to the field of Ramsey-type equilibrium models with heterogeneous agents. To this end, we state such a model in a time-continuous and time-discrete form, which in the latter case leads to a finite-dimensional mixed complementarity problem. We prove the existence of solutions of the latter problem using the theory of variational inequalities and present further properties of its solutions. Finally, we compute the growth dynamics in a calibrated model in which households differ with respect to their relative risk aversion, their discount factors, their initial wealth, and with respect to their interest rates on savings.

The Use of Trapezoidal Oriented Fuzzy Numbers in Portfolio Analysis

Oriented fuzzy numbers are a convenient tool to manage an investment portfolio as they enable the inclusion of uncertain and imprecise information about the financial market in a portfolio analysis. This kind of portfolio analysis is based on the discount factor. Thanks to this fact, this analysis is simpler than a portfolio analysis based on the return rate. The present value is imprecise due to the fact that it is modelled with the use of oriented fuzzy numbers. In such a case, the expected discount factor is also an oriented fuzzy number. The main objective of this paper is to conduct a portfolio analysis consisting of the instruments with the present value estimated as a trapezoidal oriented fuzzy number. We consider the portfolio elements as being positively and negatively oriented. We test their discount factor. Due to the fact that adding oriented fuzzy numbers is not associative, a weighted sum of positively oriented discount factors and a weighted sum of negatively oriented factors is calculated and consequently a portfolio discount factor is obtained as a weighted addition of both sums. Also, the imprecision risk of the obtained investment portfolio is estimated using measures of energy and entropy. All theoretical considerations are illustrated by an empirical case study.

Evolutionary Games and Dynamics in Public Goods Supply with Repetitive Actions

Based on a tripartite game model among suppliers of public goods, consumers, and the government, a tripartite repeated game model is constructed to analyze the evolution mechanism of which suppliers supply at low prices, consumers purchase, and the government provides incentives, and to establish the dynamics system of a repeated game. The equilibrium points of the evolutionary game are solved, and among them, the equilibrium points are found to satisfy the parameter conditions of ESS. The numerical simulation is employed to verify the impact of penalty coefficients and discount factors on the stability of strategies, which are adopted by the three players in a tripartite repeated game on public goods, and scenario analyses are conducted. The research results of this paper could provide a reference for the government, suppliers, and consumers to make rapid decisions, who are in the supply chain of public goods, especially quasi-public goods, such as coal, water, electricity, and gas, and help them to obtain stable incomes and then ensure the stable operation of the market.