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Truthful Equilibria in Dynamic Bayesian Games

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  • Johannes Horner
  • Satoru Takahashi
  • Nicolas Vieille

Abstract

This paper characterizes an equilibrium payoff subset for Markovian games with private information as discounting vanishes. Monitoring is imperfect, transitions may depend on actions, types be correlated and values interdependent. The focus is on equilibria in which players report truthfully. The characterization generalizes that for repeated games, reducing the analysis to static Bayesian games with transfers. With correlated types, results from mechanism design apply, yielding a folk theorem. With independent private values, the restriction to truthful equilibria is without loss, except for the punishment level; if players withhold their information during punishment-like phases, a "folk" theorem obtains also.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 786969000000000881.

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Date of creation: 24 Feb 2014
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Handle: RePEc:cla:levarc:786969000000000881

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  3. Claudio Mezzetti, 2005. "Mechanism Design with Interdependent Valuations: Surplus Extraction," Discussion Papers in Economics, Department of Economics, University of Leicester 05/1, Department of Economics, University of Leicester, revised Mar 2006.
  4. Ana Fernandes & Christopher Phelan, 1999. "A recursive formulation for repeated agency with history dependence," Staff Report, Federal Reserve Bank of Minneapolis 259, Federal Reserve Bank of Minneapolis.
  5. Claudio Mezzetti, 2004. "Mechanism Design with Interdependent Valuations: Efficiency," Econometrica, Econometric Society, Econometric Society, vol. 72(5), pages 1617-1626, 09.
  6. repec:rje:randje:v:37:y:2006:i:4:p:946-963 is not listed on IDEAS
  7. Gossner, Olivier & Hörner, Johannes, 2010. "When is the lowest equilibrium payoff in a repeated game equal to the minmax payoff?," Journal of Economic Theory, Elsevier, Elsevier, vol. 145(1), pages 63-84, January.
  8. Hanming Fang & Peter Norman, 2006. "To bundle or not to bundle," RAND Journal of Economics, RAND Corporation, RAND Corporation, vol. 37(4), pages 946-963, December.
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  12. Wang, Cheng, 1995. "Dynamic Insurance with Private Information and Balanced Budgets," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(4), pages 577-95, October.
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  14. Matthias Doepke & Robert M. Townsend, 2002. "Dynamic Mechanism Design With Hidden Income and Hidden Actions," UCLA Economics Working Papers, UCLA Department of Economics 818, UCLA Department of Economics.
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  16. Robert J. Aumann, 1995. "Repeated Games with Incomplete Information," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262011476, December.
  17. Gossner, Olivier, 1995. "The Folk Theorem for Finitely Repeated Games with Mixed Strategies," International Journal of Game Theory, Springer, Springer, vol. 24(1), pages 95-107.
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  19. Abreu, Dilip & Dutta, Prajit K & Smith, Lones, 1994. "The Folk Theorem for Repeated Games: A NEU Condition," Econometrica, Econometric Society, Econometric Society, vol. 62(4), pages 939-48, July.
  20. Johannes Hörner & Takuo Sugaya & Satoru Takahashi & Nicolas Vieille, 2011. "Recursive Methods in Discounted Stochastic Games: An Algorithm for δ→ 1 and a Folk Theorem," Econometrica, Econometric Society, Econometric Society, vol. 79(4), pages 1277-1318, 07.
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  22. Kosenok, Grigory & Severinov, Sergei, 2008. "Individually rational, budget-balanced mechanisms and allocation of surplus," Journal of Economic Theory, Elsevier, Elsevier, vol. 140(1), pages 126-161, May.
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