IDEAS home Printed from https://ideas.repec.org/a/eee/gamebe/v146y2024icp137-159.html
   My bibliography  Save this article

Folk theorems in repeated games with switching costs

Author

Listed:
  • Tsodikovich, Yevgeny
  • Venel, Xavier
  • Zseleva, Anna

Abstract

We study how switching costs affect the subgame perfect equilibria in repeated games. We show that (i) the Folk Theorem holds whenever the players are patient enough; (ii) the set of equilibrium payoffs is obtained by considering the payoffs of a simple one-shot auxiliary game; and (iii) the switching costs have a negative impact on a player in the infinitely undiscounted repeated game but can be beneficial for him in a finitely repeated game or in a discounted game.

Suggested Citation

  • Tsodikovich, Yevgeny & Venel, Xavier & Zseleva, Anna, 2024. "Folk theorems in repeated games with switching costs," Games and Economic Behavior, Elsevier, vol. 146(C), pages 137-159.
    • Handle: RePEc:eee:gamebe:v:146:y:2024:i:c:p:137-159
    DOI: 10.1016/j.geb.2024.05.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0899825624000745
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.geb.2024.05.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. James W. Friedman, 1973. "A Non-cooperative Equilibrium for Supergames: A Correction," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 435-435.
    2. Fudenberg, Drew & Yamamoto, Yuichi, 2011. "The folk theorem for irreducible stochastic games with imperfect public monitoring," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1664-1683, July.
    3. George A. Akerlof & Janet L. Yellen, 1985. "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 823-838.
    4. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 515-539.
    5. Lipman, Barton L. & Wang, Ruqu, 2000. "Switching Costs in Frequently Repeated Games," Journal of Economic Theory, Elsevier, vol. 93(2), pages 149-190, August.
    6. repec:dau:papers:123456789/6103 is not listed on IDEAS
    7. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
    8. Lipman, Barton L. & Wang, Ruqu, 2009. "Switching costs in infinitely repeated games," Games and Economic Behavior, Elsevier, vol. 66(1), pages 292-314, May.
    9. G. Schoenmakers & J. Flesch & F. Thuijsman & O. J. Vrieze, 2008. "Repeated Games with Bonuses," Journal of Optimization Theory and Applications, Springer, vol. 136(3), pages 459-473, March.
    10. Chakrabarti, Subir K., 1990. "Characterizations of the equilibrium payoffs of inertia supergames," Journal of Economic Theory, Elsevier, vol. 51(1), pages 171-183, June.
    11. Dutta, Prajit K., 2021. "Compromise is key in infinitely repeated bargaining with an Evergreen Clause," Journal of Economic Theory, Elsevier, vol. 193(C).
    12. Stefan Rass & Sandra König & Stefan Schauer, 2017. "Defending Against Advanced Persistent Threats Using Game-Theory," PLOS ONE, Public Library of Science, vol. 12(1), pages 1-43, January.
    13. Chantal Marlats, 2015. "A Folk theorem for stochastic games with finite horizon," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(3), pages 485-507, April.
    14. Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 375-394.
    15. O'Neill, Barry, 1994. "Game theory models of peace and war," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 29, pages 995-1053, Elsevier.
    16. Yevgeny Tsodikovich & Xavier Venel & Anna Zseleva, 2022. "The Regularity of the Value Function of Repeated Games with Switching Costs," Post-Print hal-03868995, HAL.
    17. Guney, Begum & Richter, Michael, 2018. "Costly switching from a status quo," Journal of Economic Behavior & Organization, Elsevier, vol. 156(C), pages 55-70.
    18. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, vol. 75(4), pages 708-720, September.
    19. Beggs, Alan W & Klemperer, Paul, 1992. "Multi-period Competition with Switching Costs," Econometrica, Econometric Society, vol. 60(3), pages 651-666, May.
    20. Friedman, James W, 1974. "Non-Cooperative Equilibria in Time-Dependent Supergames," Econometrica, Econometric Society, vol. 42(2), pages 221-237, March.
    21. Guney, Begum & Richter, Michael, 2022. "Games with switching costs and endogenous references," Theoretical Economics, Econometric Society, vol. 17(2), May.
    22. Chantal Marlats, 2015. "A Folk theorem for stochastic games with finite horizon," Post-Print hal-03987795, HAL.
    23. Friedman, James W, 1990. "A Modification of the Folk Theorem to Apply to Time-Dependent Supergames," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 317-335, April.
    24. Jerzy A. Filar & T. E. S. Raghavan, 1984. "A Matrix Game Solution of the Single-Controller Stochastic Game," Mathematics of Operations Research, INFORMS, vol. 9(3), pages 356-362, August.
    25. Klemperer, Paul D, 1987. "Entry Deterrence in Markets with Consumer Switching Costs," Economic Journal, Royal Economic Society, vol. 97(388a), pages 99-117, Supplemen.
    26. Benoit, Jean-Pierre & Krishna, Vijay, 1985. "Finitely Repeated Games," Econometrica, Econometric Society, vol. 53(4), pages 905-922, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yevgeny Tsodikovich & Xavier Venel & Anna Zseleva, 2024. "The Price of History-Independent Strategies in Games with Inter-Temporal Externalities," Dynamic Games and Applications, Springer, vol. 14(5), pages 1317-1332, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yevgeny Tsodikovich & Xavier Venel & Anna Zseleva, 2022. "Folk Theorems in Repeated Games with Switching Costs," Working Papers hal-03888188, HAL.
    2. Yevgeny Tsodikovich & Xavier Venel & Anna Zseleva, 2021. "Repeated Games with Switching Costs: Stationary vs History-Independent Strategies," Working Papers halshs-03223279, HAL.
    3. Yevgeny Tsodikovich & Xavier Venel & Anna Zseleva, 2021. "Repeated Games with Switching Costs: Stationary vs History-Independent Strategies," AMSE Working Papers 2129, Aix-Marseille School of Economics, France.
    4. Yevgeny Tsodikovich & Xavier Venel & Anna Zseleva, 2021. "Repeated Games with Switching Costs: Stationary vs History Independent Strategies," Papers 2103.00045, arXiv.org, revised Oct 2021.
    5. Yevgeny Tsodikovich & Xavier Venel & Anna Zseleva, 2024. "The Price of History-Independent Strategies in Games with Inter-Temporal Externalities," Dynamic Games and Applications, Springer, vol. 14(5), pages 1317-1332, November.
    6. Guney, Begum & Richter, Michael, 2018. "Costly switching from a status quo," Journal of Economic Behavior & Organization, Elsevier, vol. 156(C), pages 55-70.
    7. Yangbo Song & Mofei Zhao, 2023. "Cooperative teaching and learning of actions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(4), pages 1289-1327, November.
    8. Lipman, Barton L. & Wang, Ruqu, 2009. "Switching costs in infinitely repeated games," Games and Economic Behavior, Elsevier, vol. 66(1), pages 292-314, May.
    9. Toker Doganoglu, 2010. "Switching costs, experience goods and dynamic price competition," Quantitative Marketing and Economics (QME), Springer, vol. 8(2), pages 167-205, June.
    10. Amit Mehra & Ram Bala & Ramesh Sankaranarayanan, 2012. "Competitive Behavior-Based Price Discrimination for Software Upgrades," Information Systems Research, INFORMS, vol. 23(1), pages 60-74, March.
    11. Jean J. Gabszewicz & Jacques-François Thisse, 2000. "Microeconomic theories of imperfect competition," Cahiers d'Économie Politique, Programme National Persée, vol. 37(1), pages 47-99.
    12. Sherzod B. Akhundjanov & Ben O. Smith & Max St. Brown, 2023. "Path Dependence as a Path to Consumer Surplus and Loyalty," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(1), pages 1-20, August.
    13. Tat Chan & Chakravarthi Narasimhan & Ying Xie, 2013. "Treatment Effectiveness and Side Effects: A Model of Physician Learning," Management Science, INFORMS, vol. 59(6), pages 1309-1325, June.
    14. Suleymanova Irina & Wey Christian, 2011. "Bertrand Competition in Markets with Network Effects and Switching Costs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-58, September.
    15. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, Enero-Abr.
    16. Dutta, Prajit K. & Siconolfi, Paolo, 2019. "Asynchronous games with transfers: Uniqueness and optimality," Journal of Economic Theory, Elsevier, vol. 183(C), pages 46-75.
    17. Wei Yin & Kent Matthews, 2016. "The determinants and profitability of switching costs in Chinese banking," Applied Economics, Taylor & Francis Journals, vol. 48(43), pages 4156-4166, September.
    18. Eric Anderson & Nanda Kumar, 2007. "Price competition with repeat, loyal buyers," Quantitative Marketing and Economics (QME), Springer, vol. 5(4), pages 333-359, December.
    19. Kim, Moshe & Kliger, Doron & Vale, Bent, 2003. "Estimating switching costs: the case of banking," Journal of Financial Intermediation, Elsevier, vol. 12(1), pages 25-56, January.
    20. Fishman, Arthur & Hellman, Ziv & Weiss, Avi, 2023. "Habit forming consumers and firm dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:146:y:2024:i:c:p:137-159. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.