Repeated Games with Voluntary Information Purchase
AbstractWe consider discounted repeated games in which players can voluntarily purchase information about the opponents’ actions at past stages. Information about a stage can be bought at a fixed but arbitrary cost. Opponents cannot observe the information purchase by a player. For our main result, we make the usual assumption that the dimension of the set FIR of feasible and individually rational payoff vectors is equal to the number of players. We show that, if there are at least three players and each player has at least four actions, then every payoff vector in the interior of the set FIR can be achieved by a Nash equilibrium of the discounted repeated game if the discount factor is sufficiently close to 1. Therefore, nearly efficient payoffs can be achieved even if the cost of monitoring is high. We show that the same result holds if there are at least four players and at least three actions for each player. Finally, we indicate how the construction can be extended to sequential equilibrium.
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Bibliographic InfoPaper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 057.
Date of creation: 2007
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Other versions of this item:
- Flesch, János & Perea, Andrés, 2009. "Repeated games with voluntary information purchase," Games and Economic Behavior, Elsevier, vol. 66(1), pages 126-145, May.
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