This paper studies correlation in discounted infinitely repeated games with public monitoring. Two extensions of the perfect public equilibrium are proposed: the public correlated equilibrium, where a correlation device sends private correlated messages to the players at the beginning of each period, and the public augmented equilibrium, where the device also publicly informs the players of the recommended action profile at the end of each period. The set of public correlated equilibrium payoffs is compared to the set of subgame perfect publicly correlated equilibrium payoffs in the perfect monitoring case. It is shown that augmented correlation produces efficiency gains in the repeated partnership game by Radner et al. (1986).
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Paper provided by Kyiv School of Economics in its series Discussion Papers with number
14.
Length: Date of creation: Jan 2008 Date of revision:
Feb 2009 Handle: RePEc:kse:dpaper:14
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games