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Repeated Games with Observation Costs

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  • Eiichi Miyagawa

    ()
    (Columbia University - Department of Economics)

  • Yasuyuki Miyahara

    ()
    (Columbia University)

  • Tadashi Sekiguchi

    ()
    (Kobe University)

Abstract

This paper analyzes repeated games in which it is possible for players to observe the other players' past actions without noise but it is costly. One's observation decision itself is not observable to the other players, and this private nature of monitoring activity makes it difficult to give the players proper incentives to monitor each other. We provide a sufficient condition for a feasible payoff vector to be approximated by a sequential equilibrium when the observation costs are sufficiently small. We then show that this result generates an approximate Folk Theorem for a wide class of repeated games with observation costs. The Folk Theorem holds for a variant of prisoners' dilemma, partnership games, and any games in which the players have an ability to "burn" small amounts of their own payoffs.

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Bibliographic Info

Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0203-14.

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Length: 38 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:clu:wpaper:0203-14

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Cited by:
  1. Yasuyuki Miyahara & Tadashi Sekiguchi, 2011. "Finitely Repeated Games with Monitoring Options," Discussion Papers 2011-44, Kobe University, Graduate School of Business Administration.
  2. Yuichi Yamamoto, 2012. "Characterizing Belief-Free Review-Strategy Equilibrium Payoffs under ConditionalIndependence," PIER Working Paper Archive 12-005, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Ichiro Obara, . "Endogenous Monitoring," UCLA Economics Online Papers 398, UCLA Department of Economics.
  4. Wojciech Olszewski & Johannes Horner, 2008. "How Robust is the Folk Theorem with Imperfect," 2008 Meeting Papers 895, Society for Economic Dynamics.

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