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Characterizing Belief-Free Review-Strategy Equilibrium Payoffs under ConditionalIndependence

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  • Yuichi Yamamoto

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    (Department of Economics, University of Pennsylvania)

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    Abstract

    This paper proposes and studies a tractable subset of Nash equilibria, belief-free review-strategy equilibria, in repeated games with private monitoring. The payoff set of this class of equilibria is characterized in the limit as the discount factor converges to one for games where players observe statistically independent signals. As an application, we develop a simple sufficient condition for the existence of asymptotically efficient equilibria, and establish a folk theorem for N-player prisoner’s dilemma. All these results are robust to a perturbation of the signal distribution, and hence remain true even under almost-independent monitoring.

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    File URL: http://economics.sas.upenn.edu/system/files/12-005.pdf
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    Bibliographic Info

    Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-005.

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    Length: 74 pages
    Date of creation: 22 Feb 2012
    Date of revision:
    Handle: RePEc:pen:papers:12-005

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    Related research

    Keywords: repeated game; private monitoring; conditional independence; belief-free review-strategy equilibrium; prisoner’s dilemma;

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    References

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    1. Eiichi Miyagawa & Yasuyuki Miyahara & Tadashi Sekiguchi, 2003. "Repeated Games with Observation Costs," KIER Working Papers 565, Kyoto University, Institute of Economic Research.
    2. Ichiro Obara, 2007. "Folk Theorem with Communication," Levine's Bibliography 784828000000000351, UCLA Department of Economics.
    3. Johannes Horner & Wojciech Olszewski, 2005. "The Folk Theorem for Games with Private, Almost-Perfect Monitoring," NajEcon Working Paper Reviews 172782000000000006, www.najecon.org.
    4. Joseph E. Harrington & Andrzej Skrzypacz, 2011. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices," American Economic Review, American Economic Association, vol. 101(6), pages 2425-49, October.
    5. Jeffrey C. Ely & Johannes Hörner & Wojciech Olszewski, 2005. "Belief-Free Equilibria in Repeated Games," Econometrica, Econometric Society, vol. 73(2), pages 377-415, 03.
    6. Michihiro Kandori & Hitoshi Matsushima, 1997. "Private observation and Communication and Collusion," Levine's Working Paper Archive 1256, David K. Levine.
    7. Hitoshi Matsushima, 2003. "Repeated Games with Private Monitoring: Two Players," CIRJE F-Series CIRJE-F-242, CIRJE, Faculty of Economics, University of Tokyo.
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    Cited by:
    1. Chandrasekher, Madhav, 0. "Unraveling in a repeated moral hazard model with multiple agents," Theoretical Economics, Econometric Society.
    2. Yuichi Yamamoto, 2012. "Individual Learning and Cooperation in Noisy Repeated Games," PIER Working Paper Archive 12-044, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Yuichi Yamamoto, 2013. "Individual Learning and Cooperation in Noisy Repeated Games," PIER Working Paper Archive 13-038, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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