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Efficiency in Repeated Two-Action Games with Local Monitoring

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  • Francesco Nava
  • Michele Piccione
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    Abstract

    The paper discusses community enforcement in infinitely repeated two-action games with local monitoring. Each player interacts with and observes only a fixed set of partners, of whom he is privately informed. The main result shows that for generic beliefs efficiency can be sustained in a sequential equilibrium in which strategies are independent of theplayers' beliefs about the monitoring structure. Stronger results are obtained when players are arbitrarily patient and payoffs are evaluated according to Banach-Mazur limits, and when players are impatient and only acyclic monitoring structures are allowed.

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    File URL: http://sticerd.lse.ac.uk/dps/te/te560.pdf
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    Bibliographic Info

    Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number /2012/560.

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    Date of creation: Sep 2011
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    Handle: RePEc:cep:stitep:/2012/560

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    Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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    1. Bloch, Francis & Genicot, Garance & Ray, Debraj, 2008. "Informal insurance in social networks," Journal of Economic Theory, Elsevier, vol. 143(1), pages 36-58, November.
    2. Itay P. Fainmesser, 2012. "Community Structure and Market Outcomes: A Repeated Games-in-Networks Approach," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 32-69, February.
    3. Spagnolo, Giancarlo & Lippert, Steffen, 2004. "Networks of Relations," Working Paper Series in Economics and Finance 570, Stockholm School of Economics, revised 03 May 2005.
    4. Itay P. Fainmesser & David A. Goldberg, 2011. "Bilateral and Community Enforcement in a Networked Market with Simple Strategies," Working Papers 2011-2, Brown University, Department of Economics.
    5. Markus Kinateder, 2006. "Repeated Games Played in a Network," UFAE and IAE Working Papers 674.06, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    6. David A. Miller & S. Nageeb Ali, 2009. "Enforcing Cooperation in Networked Societies," 2009 Meeting Papers 115, Society for Economic Dynamics.
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