Switching Costs in Infinitely Repeated Games1
AbstractWe show that small switching costs can have surprisingly dramatic effects in infinitely repeated games if these costs are large relative to payoffs in a single period. This shows that the results in Lipman and Wang  do have analogs in the case of infinitely repeated games. We also discuss whether the results here or those in Lipman–Wang  imply a discontinuity in the equilibrium outcome correspondence with respect to small switching costs. We conclude that there is not a discontinuity with respect to switching costs but that the switching costs do create a discontinuity with respect to the length of a period.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2006-003.
Date of creation: Jan 2006
Date of revision:
Publication status: published, Games and Economic Behavior
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fudenberg, Drew & Levine, David, 1983.
"Subgame-perfect equilibria of finite- and infinite-horizon games,"
Journal of Economic Theory,
Elsevier, vol. 31(2), pages 251-268, December.
- Drew Fudenberg & David K. Levine, 1983. "Subgame-Perfect Equilibria of Finite- and Infinite-Horizon Games," Levine's Working Paper Archive 219, David K. Levine.
- Dutta Prajit K., 1995. "Collusion, Discounting and Dynamic Games," Journal of Economic Theory, Elsevier, vol. 66(1), pages 289-306, June.
- Wen, Quan, 1994. "The "Folk Theorem" for Repeated Games with Complete Information," Econometrica, Econometric Society, vol. 62(4), pages 949-54, July.
- Dutta Prajit K., 1995. "A Folk Theorem for Stochastic Games," Journal of Economic Theory, Elsevier, vol. 66(1), pages 1-32, June.
- Benoit, Jean-Pierre & Krishna, Vijay, 1985. "Finitely Repeated Games," Econometrica, Econometric Society, vol. 53(4), pages 905-22, July.
- Barton L. Lipman & Ruqu Wang, 1997.
"Switching Costs in Frequently Repeated Games,"
1190, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Chakrabarti, Subir K., 1990. "Characterizations of the equilibrium payoffs of inertia supergames," Journal of Economic Theory, Elsevier, vol. 51(1), pages 171-183, June.
- Fudenberg, Drew & Maskin, Eric, 1991.
"On the dispensability of public randomization in discounted repeated games,"
Journal of Economic Theory,
Elsevier, vol. 53(2), pages 428-438, April.
- Drew Fudenberg & Eric Maskin, 1987. "On the Dispensability of Public Randomization in Discounted Repeated Games," Working papers 467, Massachusetts Institute of Technology (MIT), Department of Economics.
- Abreu, Dilip & Dutta, Prajit K & Smith, Lones, 1994. "The Folk Theorem for Repeated Games: A NEU Condition," Econometrica, Econometric Society, vol. 62(4), pages 939-48, July.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
- Lipman, Barton L. & Wang, Ruqu, 2009.
"Switching costs in infinitely repeated games,"
Games and Economic Behavior,
Elsevier, vol. 66(1), pages 292-314, May.
- Barton L. Lipman & Ruqu Wang, 2005. "Switching Costs in Infinitely Repeated Games," Boston University - Department of Economics - Working Papers Series WP2005-021, Boston University - Department of Economics, revised Jan 2006.
- Barton Lipman & Ruqu Wang, 2006. "Switching Costs in Infinitely Repeated Games," Working Papers 1032, Queen's University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Courtney Sullivan).
If references are entirely missing, you can add them using this form.