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Monitoring versus Discounting in Repeated Games

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  • Takuo Sugaya
  • Alexander Wolitzky

Abstract

We study how discounting and monitoring jointly determine whether cooperation is possible in repeated games with imperfect (public or private) monitoring. Our main result provides a simple bound on the strength of players' incentives as a function of discounting, monitoring precision, and on‐path payoff variance. We show that the bound is tight in the low‐discounting/low‐monitoring double limit, by establishing a public‐monitoring folk theorem where the discount factor and the monitoring structure can vary simultaneously.

Suggested Citation

  • Takuo Sugaya & Alexander Wolitzky, 2023. "Monitoring versus Discounting in Repeated Games," Econometrica, Econometric Society, vol. 91(5), pages 1727-1761, September.
    • Handle: RePEc:wly:emetrp:v:91:y:2023:i:5:p:1727-1761
    DOI: 10.3982/ECTA20206
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    References listed on IDEAS

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    7. Kandori, Michihiro, 2002. "Introduction to Repeated Games with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 1-15, January.
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