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Renegotiation and Symmetry in Repeated Games

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    Abstract

    It seems reasonable to suppose that in repeated games in which communications is possible, play is determined through a process of negotiation and renegotiation as events unfold. In the absence of a satisfying theory of players' bargaining power, it is unclear how to model this process. Symmetric repeated games are an important class in which the problem is less troublesome. Whatever its source, bargaining power is presumably the same for all players in a symmetric game. We take equal bargaining power to mean that a player can mount a credible objection to a continuation equilibrium in which he receives a particular expected present discounted value, if there are other self enforcing agreements that never give any player such a low continuation value after any history. This is formalized in a solution concept called consistent bargaining equilibrium.

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    File URL: http://cowles.econ.yale.edu/P/cd/d09a/d0920.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 920.

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    Length: 35 pages
    Date of creation: May 1989
    Date of revision:
    Publication status: Published in Journal of Economic Theory (August 1993), 60(2): 217-240
    Handle: RePEc:cwl:cwldpp:920

    Note: CFP 852.
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    Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
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    Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

    Related research

    Keywords: Repeated games; negotiation; bargaining theory; symmetric game; monitoring;

    References

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    1. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
    2. Asheim, G.B., 1988. "Extending Renegotiation-Proofness To Infinite Horizon Games," Papers 16-88, Norwegian School of Economics and Business Administration-.
    3. Dilip Abreu & Paul Milgrom & David Pearce, 1997. "Information and timing in repeated partnerships," Levine's Working Paper Archive 636, David K. Levine.
    4. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
    5. 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, vol. 53(1), pages 59-69, January.
    6. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
    7. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
    8. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
    9. Harrington, Joseph E, Jr, 1987. "Collusion in Multiproduct Oligopoly Games under a Finite Horizon," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 1-14, February.
    10. Douglas Bernheim, B. & Ray, Debraj, 1989. "Collective dynamic consistency in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 295-326, December.
    11. Matsushima, Hitoshi, 1989. "Efficiency in repeated games with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 48(2), pages 428-442, August.
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    Cited by:
    1. David G. Pearce, 1991. "Repeated Games: Cooperation and Rationality," Cowles Foundation Discussion Papers 983, Cowles Foundation for Research in Economics, Yale University.
    2. Nir, A., 2004. "Relationships as Commitment Devices: Strategic Silence," Discussion Paper 2004-49, Tilburg University, Center for Economic Research.

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