Continuous-Time Heterogeneous Agent Models with Recursive Utility and Preference for Late Resolution

TL;DR

This paper develops a continuous-time mean field game model with heterogeneous agents, recursive Epstein-Zin utility, and preferences for late resolution of uncertainty, analyzing solution existence and qualitative features.

Contribution

It introduces a novel mean field game framework incorporating recursive utility and late resolution preferences, with analysis of solution existence and qualitative behavior.

Findings

Existence of solutions to the coupled HJB and Fokker-Planck system.

Characterization of qualitative features of the model.

Insights into agents' preferences for late resolution of uncertainty.

Abstract

We consider continuous-time heterogeneous agent models with recursive utility (Epstein-Zin utility) cast as mean field games, in which agents prefer late resolution of uncertainty. The model leads to a system coupling a pair of Hamilton-Jacobi-Bellman equations with state constraints and Fokker-Planck-Kolmogorov equations. We investigate the existence of solutions to the mean field game system and discuss some important qualitative features of the model.