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Reputation and Equilibrium Selection in Games with a Patient Player

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  • D. Fudenberg
  • David K. Levine

Abstract

A single long-run player plays a simultaneous-move stage game against a sequence of opponents who play only once, but observe all previous play. Let the “Stackelberg strategy” be the pure strategy to which the long-run player would most like to commit himself. If there is positive prior probability that the long-run player will always play the Stackelberg strategy, then his payoff in any Nash equilibrium exceeds a bound that converges to the Stackelberg payoff as his discount factor approaches one. When the stage game is not simultaneous move, this result must be modified to account for the possibility that distinct strategies of the long-run player are observationally equivalent.
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Suggested Citation

  • D. Fudenberg & David K. Levine, 1989. "Reputation and Equilibrium Selection in Games with a Patient Player," Levine's Working Paper Archive 508, David K. Levine.
    • Handle: RePEc:cla:levarc:508
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    References listed on IDEAS

    as
    1. Drew Fudenberg & David M. Kreps & David K. Levine, 2008. "On the Robustness of Equilibrium Refinements," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 5, pages 67-93, World Scientific Publishing Co. Pte. Ltd..
    2. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    3. Drew Fudenberg & David Levine, 2008. "Subgame–Perfect Equilibria of Finite– and Infinite–Horizon Games," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 1, pages 3-20, World Scientific Publishing Co. Pte. Ltd..
    4. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
    5. D. Fudenberg & D. M. Kreps, 1969. "Reputation and Simultaneous Opponents," Levine's Working Paper Archive 604, David K. Levine.
    6. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
    7. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    8. Drew Fudenberg & David M. Kreps & Eric S. Maskin, 1990. "Repeated Games with Long-run and Short-run Players," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(4), pages 555-573.
    9. Reinhard Selten, 1974. "The Chain Store Paradox," Center for Mathematical Economics Working Papers 018, Center for Mathematical Economics, Bielefeld University.
    10. 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..
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    • I10 - Health, Education, and Welfare - - Health - - - General

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