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Private Monitoring and Communication in the Repeated Prisoner’s Dilemma

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  • Yu Awaya

    (Department of Economics, University of Rochester and Institute of Social and Economic Research, Osaka University, Harkness 228, Rochester, NY 14627, USA)

Abstract

This paper provides a model of the repeated prisoner’s dilemma in which cheap-talk communication is necessary in order to achieve cooperative outcomes in a long-term relationship. The model is one of complete information. I consider a continuous time repeated prisoner’s dilemma game where informative signals about another player’s past actions arrive following a Poisson process; actions have to be held fixed for a certain time. I assume that signals are privately observed by players. I consider an environment where signals are noisy, and the correlation of signals is higher if both players cooperate. We show that, provided that players can change their actions arbitrary frequently, there exists an equilibrium with communication that strictly Pareto-dominates all equilibria without communication.

Suggested Citation

  • Yu Awaya, 2021. "Private Monitoring and Communication in the Repeated Prisoner’s Dilemma," Games, MDPI, vol. 12(4), pages 1-10, October.
    • Handle: RePEc:gam:jgames:v:12:y:2021:i:4:p:80-:d:664475
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    References listed on IDEAS

    as
    1. Yu Awaya & Vijay Krishna, 2016. "On Communication and Collusion," American Economic Review, American Economic Association, vol. 106(2), pages 285-315, February.
    2. Fleckinger, Pierre, 2012. "Correlation and relative performance evaluation," Journal of Economic Theory, Elsevier, vol. 147(1), pages 93-117.
    3. Awaya, Yu & Krishna, Vijay, 2019. "Communication and cooperation in repeated games," Theoretical Economics, Econometric Society, vol. 14(2), May.
    4. Abreu, Dilip & Milgrom, Paul & Pearce, David, 1991. "Information and Timing in Repeated Partnerships," Econometrica, Econometric Society, vol. 59(6), pages 1713-1733, November.
    5. David Spector, 2017. "Cheap talk, monitoring and collusion," Working Papers hal-01975642, HAL.
    6. Aoyagi, Masaki, 2002. "Collusion in Dynamic Bertrand Oligopoly with Correlated Private Signals and Communication," Journal of Economic Theory, Elsevier, vol. 102(1), pages 229-248, January.
    7. Olivier Compte, 1998. "Communication in Repeated Games with Imperfect Private Monitoring," Econometrica, Econometric Society, vol. 66(3), pages 597-626, May.
    8. Zheng, Bingyong, 2008. "Approximate efficiency in repeated games with correlated private signals," Games and Economic Behavior, Elsevier, vol. 63(1), pages 406-416, May.
    9. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
    Full references (including those not matched with items on IDEAS)

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