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A Folk Theorem for Games when Frequent Monitoring Decreases Noise

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  • Osório Costa, Antonio Miguel

Abstract

This paper studies frequent monitoring in an infinitely repeated game with imperfect public information and discounting, where players observe the state of a continuous time Brownian process at moments in time of length _. It shows that a limit folk theorem can be achieved with imperfect public monitoring when players monitor each other at the highest frequency, i.e., _. The approach assumes that the expected joint output depends exclusively on the action profile simultaneously and privately decided by the players at the beginning of each period of the game, but not on _. The strong decreasing effect on the expected immediate gains from deviation when the interval between actions shrinks, and the associated increase precision of the public signals, make the result possible in the limit. JEL: C72/73, D82, L20. KEYWORDS: Repeated Games, Frequent Monitoring, Public Monitoring, Brownian Motion.

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Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/179667.

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Date of creation: 2011
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Handle: RePEc:urv:wpaper:2072/179667

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Keywords: Teoria de jocs; 33 - Economia; 65 - Gestió i organització. Administració i direcció d'empreses. Publicitat. Relacions públiques. Mitjans de comunicació de masses;

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  1. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers, UCLA Department of Economics 10A, UCLA Department of Economics.
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  3. Levine, David & Fudenberg, Drew, 2007. "Continuous Time Limits of Repeated Games with Imperfect Public Monitoring," Scholarly Articles 3196334, Harvard University Department of Economics.
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  5. Yuliy Sannikov & Andrzej Skrzypacz, 2004. "Impossibility of Collusion under Imperfect Monitoring with Flexible Production," 2004 Meeting Papers, Society for Economic Dynamics 418, Society for Economic Dynamics.
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  7. Bergin, James & MacLeod, W Bentley, 1993. "Continuous Time Repeated Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 21-37, February.
  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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  12. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, Econometric Society, vol. 62(5), pages 997-1039, September.
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  16. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Yuliy Sannikov & Andrzej Skrzypacz, 2010. "The Role of Information in Repeated Games With Frequent Actions," Econometrica, Econometric Society, Econometric Society, vol. 78(3), pages 847-882, 05.
  18. Simon, Leo K & Stinchcombe, Maxwell B, 1989. "Extensive Form Games in Continuous Time: Pure Strategies," Econometrica, Econometric Society, Econometric Society, vol. 57(5), pages 1171-1214, September.
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