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A Folk Theorem for Games when Frequent Monitoring Decreases Noise

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  • Osório António M.

    () (Universidad Carlos III de Madrid and Universitat Rovira i Virgili)

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 Δ. 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., Δ↓0. 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 Δ. 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.

Suggested Citation

  • Osório António M., 2012. "A Folk Theorem for Games when Frequent Monitoring Decreases Noise," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-27, April.
  • Handle: RePEc:bpj:bejtec:v:12:y:2012:i:1:n:11
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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