An algorithm for two-player repeated games with perfect monitoring
AbstractConsider repeated two-player games with perfect monitoring and discounting. We provide an algorithm that computes the set V* of payoff pairs of all pure-strategy subgame perfect equilibria with public randomization. The algorithm provides signiﬁcant eﬃciency gains over the existing implementations of the algorithm from Abreu, Pearce and Stacchetti (1990). These eﬃciency gains arise from a better understanding of the manner in which extreme points of the equilibrium payoﬀ set are generated. An important theoretical implication of our algorithm is that the set of extreme points E of V* is finite. Indeed, |E| ≤ 3|A|, where A is the set of action proﬁles of the stage game.
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Bibliographic InfoArticle provided by Econometric Society in its journal Theoretical Economics.
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Repeated games; perfect monitoring; computation;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
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- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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