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Discounted Stochastic Games with Voluntary Transfers

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  • Sebastian Kranz

    (Dept. of Economics, University of Bonn, Institute for Energy Economics, University of Cologne)

Abstract

This paper studies discounted stochastic games perfect or imperfect public monitoring and the opportunity to conduct voluntary monetary transfers. We show that for all discount factors every public perfect equilibrium payoff can be implemented with a simple class of equilibria that have a stationary structure on the equilibrium path and optimal penal codes with a stick and carrot structure. We develop algorithms that exactly compute or approximate the set of equilibrium payoffs and find simple equilibria that implement these payoffs.

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File URL: http://cowles.econ.yale.edu/P/cd/d18a/d1847.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1847.

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Length: 32 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:cwl:cwldpp:1847

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Phone: (203) 432-3702
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Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

Related research

Keywords: Stochastic games; Monetary transfers; Computation; Imperfect public monitoring; Public perfect equilibria;

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References

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  1. Baliga, Sandeep & Evans, Robert, 2000. "Renegotiation in Repeated Games with Side-Payments," Games and Economic Behavior, Elsevier, vol. 33(2), pages 159-176, November.
  2. Joseph E. Harrington Jr. & Andrzej Skrzypacz, 2007. "Collusion under monitoring of sales," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 314-331, 06.
  3. Eric Maskin & Jean Tirole, 1997. "Markov Perfect Equilibrium, I: Observable Actions," Harvard Institute of Economic Research Working Papers 1799, Harvard - Institute of Economic Research.
  4. 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.
  5. Kranz, Sebastian & Ohlendorf, Susanne, 2009. "Renegotiation-Proof Relational Contracts with Side Payments," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 259, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  6. Goldluecke, Susanne & Kranz, Sebastian, 2010. "In?nitely Repeated Games with Public Monitoring and Monetary Transfers," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 332, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  7. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 447-80, March.
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  12. C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September.
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  14. Fong, Yuk-fai & Surti, Jay, 2009. "The optimal degree of cooperation in the repeated Prisoners' Dilemma with side payments," Games and Economic Behavior, Elsevier, vol. 67(1), pages 277-291, September.
  15. Jonathan Levin, 2003. "Relational Incentive Contracts," American Economic Review, American Economic Association, vol. 93(3), pages 835-857, June.
  16. Fudenberg, Drew & Yamamoto, Yuichi, 2011. "The Folk Theorem for Irreducible Stochastic Games with Imperfect Public Monitoring," Scholarly Articles 8896226, Harvard University Department of Economics.
  17. Kenneth L. Judd & Sevin Yeltekin & James Conklin, 2003. "Computing Supergame Equilibria," Econometrica, Econometric Society, Econometric Society, vol. 71(4), pages 1239-1254, 07.
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Cited by:
  1. Sebastian Kranz, 2013. "Relational Contracting, Repeated Negotiations, and Hold-Up," Levine's Working Paper Archive 786969000000000676, David K. Levine.

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