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Efficiency in repeated two-action games with local monitoring

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  • Nava, Francesco
  • Piccione, Michele

Abstract

The paper discusses community enforcement in infinitely repeated two-action games with local monitoring. Each player interacts with and observes only a fixed set of partners, of whom he is privately informed. The main result shows that for generic beliefs efficiency can be sustained in a sequential equilibrium in which strategies are independent of the players’ beliefs about the monitoring structure. Stronger results are obtained when players are arbitrarily patient and payoffs are evaluated according to Banach-Mazur limits, and when players are impatient and only acyclic monitoring structures are allowed.

Suggested Citation

  • Nava, Francesco & Piccione, Michele, 2011. "Efficiency in repeated two-action games with local monitoring," LSE Research Online Documents on Economics 58062, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:58062
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    File URL: http://eprints.lse.ac.uk/58062/
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    References listed on IDEAS

    as
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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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