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Online concealed correlation and bounded rationality

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  • Bavly, Gilad
  • Neyman, Abraham

Abstract

Correlation of players' actions may evolve in the common course of the play of a repeated game with perfect monitoring (“online correlation”). In this paper we study the concealment of such correlation from a boundedly rational player. We show that “strong” players, i.e., players whose strategic complexity is less stringently bounded, can orchestrate the online correlation of the actions of “weak” players, where this correlation is concealed from an opponent of “intermediate” strength. The feasibility of such “online concealed correlation” is reflected in the individually rational payoff of the opponent and in the equilibrium payoffs of the repeated game.

Suggested Citation

  • Bavly, Gilad & Neyman, Abraham, 2014. "Online concealed correlation and bounded rationality," Games and Economic Behavior, Elsevier, vol. 88(C), pages 71-89.
    • Handle: RePEc:eee:gamebe:v:88:y:2014:i:c:p:71-89
    DOI: 10.1016/j.geb.2014.08.004
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    Cited by:

    1. Bavly, Gilad & Peretz, Ron, 2019. "Limits of correlation in repeated games with bounded memory," Games and Economic Behavior, Elsevier, vol. 115(C), pages 131-145.
    2. Halpern, Joseph Y. & Pass, Rafael & Seeman, Lior, 2019. "The truth behind the myth of the Folk theorem," Games and Economic Behavior, Elsevier, vol. 117(C), pages 479-498.
    3. Olivier Gossner & Penélope Hernández & Ron Peretz, 2016. "The complexity of interacting automata," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(1), pages 461-496, March.

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    More about this item

    Keywords

    Repeated games; Bounded recall; Finite automata; Concealed correlation; Folk theorem; Equilibrium payoffs;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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