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Repeated games with incomplete information and discounting

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  • Peski, Marcin

    () (University of Toronto)

Abstract

Abstract. We analyze discounted repeated games with incomplete information, such that the players' payoffs depend only on their own type (known-own payoff case). We describe an algorithm for finding all equilibrium payoffs in games for which there exists an open set of belief-free equilibria of Hörner and Lovo (2009). This includes generic games with one-sided incomplete information and a large and important class of games with multi-sided incomplete information. When players become sufficiently patient, all Bayesian Nash equilibrium payoffs can be approximated by payoffs in sequential equilibria in which information is revealed finitely many times. The set of equilibrium payoffs is typically larger than the set of equilibrium payoffs in repeated games without discounting, and larger than the set of payoffs obtained in belief-free equilibria. The results are illustrated in bargaining and oligopoly examples.

Suggested Citation

  • Peski, Marcin, 2014. "Repeated games with incomplete information and discounting," Theoretical Economics, Econometric Society, vol. 9(3), September.
  • Handle: RePEc:the:publsh:1390
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    References listed on IDEAS

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    1. Susan Athey & Kyle Bagwell, 2008. "Collusion With Persistent Cost Shocks," Econometrica, Econometric Society, vol. 76(3), pages 493-540, May.
    2. Sergiu Hart, 1985. "Nonzero-Sum Two-Person Repeated Games with Incomplete Information," Mathematics of Operations Research, INFORMS, vol. 10(1), pages 117-153, February.
    3. repec:cor:louvrp:-636 is not listed on IDEAS
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    Cited by:

    1. Salomon, Antoine & Forges, Françoise, 2015. "Bayesian repeated games and reputation," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 70-104.

    More about this item

    Keywords

    Repeated games; incomplete information; reputation;

    JEL classification:

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

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