Robustness to incomplete information in repeated games
This paper extends the framework of Kajii and Morris (1997) to study the question of robustness to incomplete information in repeated games. We show that dynamically robust equilibria can be characterized using a one-shot robustness principle that extends the one-shot deviation principle. Using this result, we compute explicitly the set of dynamically robust equilibrium values in the repeated prisoners' dilemma. We show that robustness requirements have sharp intuitive implications regarding when cooperation can be sustained, what strategies are best suited to sustain cooperation, and how changes in payoffs affect the sustainability of cooperation. We also show that a folk theorem in dynamically robust equilibria holds, but requires stronger identifiability conditions than the pairwise full rank condition of Fudenberg, Levine and Maskin (1994).
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- Frankel, David M. & Morris, Stephen & Pauzner, Ady, 2003.
"Equilibrium selection in global games with strategic complementarities,"
Journal of Economic Theory,
Elsevier, vol. 108(1), pages 1-44, January.
- David M. Frankel & Stephen Morris & Ady Pauzner, 2000. "Equilibrium Selection in Global Games with Strategic Complementarities," Econometric Society World Congress 2000 Contributed Papers 1490, Econometric Society.
- David M. Frankel & Stephen Morris & Ady Pauzner, 2001. "Equilibrium Selection in Global Games with Strategic Complementarities," Cowles Foundation Discussion Papers 1336, Cowles Foundation for Research in Economics, Yale University.
- Frankel, David M. & Morris, Stephen & Pauzner, Ady, 2003. "Equilibrium Selection in Global Games with Strategic Complementarities," Staff General Research Papers Archive 11920, Iowa State University, Department of Economics.
- Jonathan Weinstein & Muhamet Yildiz, 2007. "A Structure Theorem for Rationalizability with Application to Robust Predictions of Refinements," Econometrica, Econometric Society, vol. 75(2), pages 365-400, 03.