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Reputation in Dynamic Games

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  • Marco Celentani
  • Wolfgang Pesendorfer

Abstract

We consider an infinite dynamic game played by one large player and a large number of small players. State variables are allowed, and public histories include only the play of the large player, the aggregate play of the small players and the aggregate state variable. We use a reputational argument that restricts the set of equilibria to profiles that give the large player almost what he could get by committing to an optimal strategy as his discount factor approaches 1. Furthermore we identify a class of dynamic games where this result holds even if the small players' discount factor also approaches 1.

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Bibliographic Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1009.

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Date of creation: Oct 1992
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Handle: RePEc:nwu:cmsems:1009

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References

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  1. Schmidt, Klaus M., 1993. "Reputation and Equilibrium Characterization in Repeated Games with Conflicting Interests," Munich Reprints in Economics 3395, University of Munich, Department of Economics.
  2. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  3. Dutta, P.K., 1991. "A Folk Theorem for Stochastic Games," RCER Working Papers 293, University of Rochester - Center for Economic Research (RCER).
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  6. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
  7. V.V. Chari & Patrick J. Kehoe, 1989. "Sustainable plans," Staff Report 122, Federal Reserve Bank of Minneapolis.
  8. repec:fth:coluec:565 is not listed on IDEAS
  9. Kydland, Finn E. & Prescott, Edward C., 1980. "Dynamic optimal taxation, rational expectations and optimal control," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 79-91, May.
  10. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  11. Dekel, Eddie & Farrell, Joseph, 1990. "One-Sided Patience with One-Sided Communication Does Not Justify Stackelberg Equilibrium," Department of Economics, Working Paper Series qt58n9q9vz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  12. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
  13. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  14. Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-31, May.
  15. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
  16. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
  17. Cripps, M.W. & Thomas, J.P., 1992. "Reputation and commitment in two-person repeated games," Discussion Paper 1992-10, Tilburg University, Center for Economic Research.
  18. Cripps, Martin W & Thomas, Jonathan P, 1995. "Reputation and Commitment in Two-Person Repeated Games without Discounting," Econometrica, Econometric Society, vol. 63(6), pages 1401-19, November.
  19. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
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Citations

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Cited by:
  1. Riboni, Alessandro, 2010. "Committees as Substitutes for Commitment," Economics Papers from University Paris Dauphine 123456789/7684, Paris Dauphine University.
  2. Fudenberg, Drew & Levine, David & Pesendorfer, Wolfgang, 1998. "When Are Nonanonymous Players Negligible?," Journal of Economic Theory, Elsevier, vol. 79(1), pages 46-71, March.
  3. Modesto, Leonor & Thomas, Jonathan P., 2001. "An analysis of labour adjustment costs in unionized economies," Labour Economics, Elsevier, vol. 8(4), pages 475-501, September.
  4. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521692083, October.
  5. Wolfgang Pesendorfer & David Levine, 1992. "When are Agents Negligible?," Discussion Papers 1018, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Sorin, Sylvain, 1999. "Merging, Reputation, and Repeated Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 274-308, October.
  7. Marco Celentani & Drew Fudenberg & David K Levine & Wolfgang Pesendorfer, 2006. "Maintaining A Reputation Against A Patient Opponent," Levine's Working Paper Archive 699152000000000019, David K. Levine.
  8. Marco Celentani, 1993. "Maintaining a Reputation Against A Long-Lived Opponent," Discussion Papers 1075R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Phelan, Christopher, 2006. "Public trust and government betrayal," Journal of Economic Theory, Elsevier, vol. 130(1), pages 27-43, September.
  10. Peter J. Hammond & Yeneng Sun, 2000. "Joint Measurability and the One-way Fubini Property for a Continuum of Independent Random Variables," Working Papers 00008, Stanford University, Department of Economics.
  11. Christopher Phelan, 2001. "Public trust and government betrayal," Staff Report 283, Federal Reserve Bank of Minneapolis.

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