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The Castle on the Hill

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  • David Levine

    (UCLA)

Abstract

A simple example of a stochastic games with irreversibility is studied and it is shown that the folk theorem fails in a robust way. In this game of Castle on the Hill, for a broad range of discount factors, including those close to me, equilibrium is unique. Moreover, the equilibrium for large discount factors is Pareto dominated by the equilibrium for low discount factors. A unique cyclic equilibrium is also possible for intermediate ranges of discount factors. (Copyright: Elsevier)

Suggested Citation

  • David Levine, 2000. "The Castle on the Hill," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(2), pages 330-337, April.
  • Handle: RePEc:red:issued:v:3:y:2000:i:2:p:330-337 DOI: 10.1006/redy.2000.0094
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
    3. Abreu, Dilip & Dutta, Prajit K & Smith, Lones, 1994. "The Folk Theorem for Repeated Games: A NEU Condition," Econometrica, Econometric Society, vol. 62(4), pages 939-948, July.
    4. Dutta Prajit K., 1995. "A Folk Theorem for Stochastic Games," Journal of Economic Theory, Elsevier, vol. 66(1), pages 1-32, June.
    5. Rudiger Dornbusch, 1982. "Equilibrium and Disequilibrium Exchange Rates," NBER Working Papers 0983, National Bureau of Economic Research, Inc.
    6. Abreu, D. & Dutta, P.K. & Smith, L., 1992. "Folk Theorems for Repeated Games: A NEU Condition," Working papers 92-15, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Binmore, K & Shaked, A & Sutton, J, 1985. "Testing Noncooperative Bargaining Theory: A Preliminary Study," American Economic Review, American Economic Association, pages 1178-1180.
    8. 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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    Cited by:

    1. David K Levine & Aldo Rustichini, 2000. "Introduction: The Dynamic Games Special Issue," Levine's Working Paper Archive 2127, David K. Levine.

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