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Finitely Repeated Games with Monitoring Options


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  • Yasuyuki Miyahara

    (Graduate School of Business Administration, Kobe University)

  • Tadashi Sekiguchi

    (Institute of Economic Research, Kyoto University)

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    We study finitely repeated games where players can decide whether to monitor the other players' actions or not every period. Monitoring is assumed to be costless and private. We compare our model with the standard one where the players automatically monitor each other. Since monitoring other players never hurts, any equilibrium payoff vector of a standard finitely repeated game is an equilibrium payoff vector of the same game with monitoring options. We show that some finitely repeated games with monitoring options have sequential equilibrium outcomes which cannot be sustained under the standard model, even if the stage game has a unique Nash equilibrium. We also present sufficient conditions for a folk theorem, when the players have a long horizon.

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    Bibliographic Info

    Paper provided by Kobe University, Graduate School of Business Administration in its series Discussion Papers with number 2011-44.

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    Length: 26 pages
    Date of creation: Oct 2011
    Date of revision:
    Handle: RePEc:kbb:dpaper:2011-44

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    Keywords: Finitely repeated games; Imperfect monitoring; Folk theorem;

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    1. Lipman, Barton L. & Wang, Ruqu, 2000. "Switching Costs in Frequently Repeated Games," Journal of Economic Theory, Elsevier, Elsevier, vol. 93(2), pages 149-190, August.
    2. Gossner, Olivier, 1995. "The Folk Theorem for Finitely Repeated Games with Mixed Strategies," International Journal of Game Theory, Springer, Springer, vol. 24(1), pages 95-107.
    3. Miyagawa, Eiichi & Miyahara, Yasuyuki & Sekiguchi, Tadashi, 2008. "The folk theorem for repeated games with observation costs," Journal of Economic Theory, Elsevier, Elsevier, vol. 139(1), pages 192-221, March.
    4. Eiichi Miyagawa & Yasuyuki Miyahara & Tadashi Sekiguchi, 2003. "Repeated Games with Observation Costs," KIER Working Papers, Kyoto University, Institute of Economic Research 565, Kyoto University, Institute of Economic Research.
    5. Michihiro Kandori, 2001. "Introduction to Repeated Games with Private Monitoring," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-114, CIRJE, Faculty of Economics, University of Tokyo.
    6. Gonzalez-Diaz, Julio, 2006. "Finitely repeated games: A generalized Nash folk theorem," Games and Economic Behavior, Elsevier, Elsevier, vol. 55(1), pages 100-111, April.
    7. Flesch, János & Perea, Andrés, 2009. "Repeated games with voluntary information purchase," Games and Economic Behavior, Elsevier, Elsevier, vol. 66(1), pages 126-145, May.
    8. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, Econometric Society, vol. 54(3), pages 533-54, May.
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    Cited by:
    1. Osório Costa, Antonio Miguel, 2012. "The Limits of Discrete Time Repeated Games:Some Notes and Comments," Working Papers 2072/203171, Universitat Rovira i Virgili, Department of Economics.


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