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Repeated Games with Private Monitoring: Two Players

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  • Hitoshi Matsushima

Abstract

We investigate two-player infinitely repeated games where the discount factor is less than but close to unity. Monitoring is private and players cannot communicate. We require no condition concerning the accuracy of players' monitoring technology. We show the folk theorem for the prisoners' dilemma with conditional independence. We also investigate more general games where players' private signals are correlated only through an unobservable macro shock. We show that efficiency is sustainable for generic private signal structures when the size of the set of private signals is sufficiently large. Finally, we show that cartel collusion is sustainable in price-setting duopoly. Copyright The Econometric Society 2004.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2004.00513.x
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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 72 (2004)
Issue (Month): 3 (05)
Pages: 823-852

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Handle: RePEc:ecm:emetrp:v:72:y:2004:i:3:p:823-852

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  1. George J. Mailath & Stephen Morris, 1999. "Repeated Games with Almost-Public Monitoring," Cowles Foundation Discussion Papers 1236, Cowles Foundation for Research in Economics, Yale University.
  2. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  3. Jeffrey C. Ely & Juuso Valimaki, 1999. "A Robust Folk Theorem for the Prisoner's Dilemma," Discussion Papers 1264, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Lehrer, E, 1989. "Lower Equilibrium Payoffs in Two-Player Repeated Games with Non-observable Actions," International Journal of Game Theory, Springer, vol. 18(1), pages 57-89.
  5. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
  6. Michihiro Kandori, 2001. "Introduction to Repeated Games with Private Monitoring," CIRJE F-Series CIRJE-F-114, CIRJE, Faculty of Economics, University of Tokyo.
  7. Bhaskar, V. & Obara, Ichiro, 2002. "Belief-Based Equilibria in the Repeated Prisoners' Dilemma with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 40-69, January.
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