Robustness to incomplete information in repeated games
AbstractThis paper extends the framework of Kajii and Morris (1997) to study the question of robustness to incomplete information in repeated games. We show that dynamically robust equilibria can be characterized using a one-shot robustness principle that extends the one-shot deviation principle. Using this result, we compute explicitly the set of dynamically robust equilibrium values in the repeated prisoners' dilemma. We show that robustness requirements have sharp intuitive implications regarding when cooperation can be sustained, what strategies are best suited to sustain cooperation, and how changes in payoffs affect the sustainability of cooperation. We also show that a folk theorem in dynamically robust equilibria holds, but requires stronger identifiability conditions than the pairwise full rank condition of Fudenberg, Levine and Maskin (1994).
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Bibliographic InfoArticle provided by Econometric Society in its journal Theoretical Economics.
Volume (Year): 6 (2011)
Issue (Month): 1 (January)
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Web page: http://econtheory.org
Robustness to incomplete information; one-shot robustness principle; repeated Prisoners' Dilemma; selective punishment; folk theorem;
Find related papers by 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
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- David M. Frankel & Stephen Morris & Ady Pauzner, 2001.
"Equilibrium Selection in Global Games with Strategic Complementarities,"
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