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Designing Efficient Resource Sharing For Impatient Players Using Limited Monitoring

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  • Mihaela van der Schaar

    (Electrictal Engineering, UCLA)

  • Yuanzhang Xiao

    (Electrictal Engineering, UCLA)

  • William Zame

    (Economics, UCLA)

Abstract

The problem of efficient sharing of a resource is nearly ubiquitous. Except for pure public goods, each agent's use creates a negative externality; often the negative externality is so strong that efficient sharing is impossible in the short run. We show that, paradoxically, the impossibility of efficient sharing in the short run enhances the possibility of efficient sharing in the long run, even if outcomes depend stochastically on actions, monitoring is limited and users are not patient. We base our analysis on the familiar framework of repeated games with imperfect public monitoring, but we extend the framework to view the monitoring structure as chosen by a designer who balances the benefits and costs of more accurate observations and reports. Our conclusions are much stronger than in the usual folk theorems: we do not require a rich signal structure or patient users and provide an explicit online construction of equilibrium strategies.

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Bibliographic Info

Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 1320.

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Length: 65 pages
Date of creation: 2013
Date of revision: Aug 2013
Handle: RePEc:eie:wpaper:1320

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  1. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  2. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195300796, October.
  3. Fudenberg, D. & Levine, D.K. & Maskin, E., 1989. "The Folk Theorem With Inperfect Public Information," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 523, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. George J. Mailath & Ichiro Obara & Tadashi Sekiguchi, . "The Maximum Efficient Equilibrium Payoff in the Repeated Prisoners' Dilemma," Penn CARESS Working Papers, Penn Economics Department 83719e84b6825736ffcfdfacb, Penn Economics Department.
  5. Drew Fudenberg & David K. Levine & Satoru Takahashi, 2004. "Perfect Public Equilibrium When Players Are Patient," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 2051, Harvard - Institute of Economic Research.
  6. Blume, Lawrence E & Zame, William R, 1994. "The Algebraic Geometry of Perfect and Sequential Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 62(4), pages 783-94, July.
  7. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-65, Autumn.
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