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Information and timing in repeated partnerships

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  • Dilip Abreu
  • Paul Milgrom
  • David Pearce

Abstract

In a repeated partnership game with imperfect monitoring, we distinguish among the effects of (1) shortening the period over which actions are held fixed, (2) increasing the frequency with which accumulated information is reported, and (3) reducing the amount of discounting of payoffs between successive periods. While reducing the amount of discounting generally improves incentives for cooperation, the other two changes can have the reverse effect. When the game is specified in the customary way with information reported at the end of each period of fixed action, the net effect of shortening the period length can be to destroy all incentives for cooperation, reversing the usual conclusion associated with the Folk Theorem for repeated games. Moreover, when interest rates are low, reducing the frequency of information reporting can greatly enhance the efficiency of equilibrium.

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Bibliographic Info

Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 636.

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Date of creation: 01 Aug 1997
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Handle: RePEc:cla:levarc:636

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  1. David Kreps & Robert Wilson, 1998. "Sequential Equilibria," Levine's Working Paper Archive 237, David K. Levine.
  2. Fudenberg, D. & Levine, D.K. & Maskin, E., 1989. "The Folk Theorem With Inperfect Public Information," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 523, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Fudenberg, Drew & Holmstrom, Bengt & Milgrom, Paul, 1990. "Short-term contracts and long-term agency relationships," Journal of Economic Theory, Elsevier, Elsevier, vol. 51(1), pages 1-31, June.
  4. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, Elsevier, vol. 39(1), pages 251-269, June.
  5. Spear, Stephen E & Srivastava, Sanjay, 1987. "On Repeated Moral Hazard with Discounting," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(4), pages 599-617, October.
  6. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 303-28, March.
  7. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, Econometric Society, vol. 49(5), pages 1127-48, September.
  8. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  9. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, Elsevier, vol. 39(1), pages 191-225, June.
  10. Matsushima, Hitoshi, 1989. "Efficiency in repeated games with imperfect monitoring," Journal of Economic Theory, Elsevier, Elsevier, vol. 48(2), pages 428-442, August.
  11. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, Elsevier, vol. 29(2), pages 313-338, April.
  12. Radner, Roy, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(1), pages 43-57, January.
  13. Radner, Roy & Myerson, Roger & Maskin, Eric, 1986. "An Example of a Repeated Partnership Game with Discounting and with Uniformly Inefficient Equilibria," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(1), pages 59-69, January.
  14. Rogerson, William P, 1985. "Repeated Moral Hazard," Econometrica, Econometric Society, Econometric Society, vol. 53(1), pages 69-76, January.
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