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Truthful Equilibria in Dynamic Bayesian Games

This paper characterizes an equilibrium payoff subset for Markovian games with private information as discounting vanishes. Monitoring is imperfect, transitions may depend on actions, types be correlated and values interdependent. The focus is on equilibria in which players report truthfully. The characterization generalizes that for repeated games, reducing the analysis to static Bayesian games with transfers. With correlated types, results from mechanism design apply, yielding a folk theorem. With independent private values, the restriction to truthful equilibria is without loss, except for the punishment level; if players withhold their information during punishment-like phases, a "folk" theorem obtains also.

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File URL: http://cowles.econ.yale.edu/P/cd/d19a/d1933.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1933.

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Length: 73 pages
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:cwl:cwldpp:1933
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Web page: http://cowles.econ.yale.edu/

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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  1. Claudio Mezzetti, 2004. "Mechanism Design with Interdependent Valuations: Efficiency," Econometrica, Econometric Society, vol. 72(5), pages 1617-1626, 09.
  2. Ichiro Obara, . "The Full Surplus Extraction Theorem with Hidden Actions," UCLA Economics Online Papers 374, UCLA Department of Economics.
  3. Ana Fernandes & Christopher Phelan, 1999. "A recursive formulation for repeated agency with history dependence," Staff Report 259, Federal Reserve Bank of Minneapolis.
  4. Robert J. Aumann, 1995. "Repeated Games with Incomplete Information," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011476, June.
  5. Wiseman, Thomas & Peski, Marcin, 2015. "A folk theorem for stochastic games with infrequent state changes," Theoretical Economics, Econometric Society, vol. 10(1), January.
  6. Gossner, Olivier, 1995. "The Folk Theorem for Finitely Repeated Games with Mixed Strategies," International Journal of Game Theory, Springer, vol. 24(1), pages 95-107.
  7. Matthias Doepke & Robert M. Townsend, 2002. "Dynamic Mechanism Design With Hidden Income and Hidden Actions," UCLA Economics Working Papers 818, UCLA Department of Economics.
  8. Kosenok, Grigory & Severinov, Sergei, 2008. "Individually rational, budget-balanced mechanisms and allocation of surplus," Journal of Economic Theory, Elsevier, vol. 140(1), pages 126-161, May.
  9. Cheng Wang, 2010. "Dynamic Insurance with Private Information and Balanced Budgets," Levine's Working Paper Archive 2064, David K. Levine.
  10. Johannes Hörner & Takuo Sugaya & Satoru Takahashi & Nicolas Vieille, 2011. "Recursive Methods in Discounted Stochastic Games: An Algorithm for δ→ 1 and a Folk Theorem," Econometrica, Econometric Society, vol. 79(4), pages 1277-1318, 07.
  11. Abreu, Dilip & Dutta, Prajit K & Smith, Lones, 1994. "The Folk Theorem for Repeated Games: A NEU Condition," Econometrica, Econometric Society, vol. 62(4), pages 939-48, July.
  12. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-65, Autumn.
  13. Abraham Neyman, 2008. "Existence of optimal strategies in Markov games with incomplete information," International Journal of Game Theory, Springer, vol. 37(4), pages 581-596, December.
  14. Harold L. Cole & Narayana R. Kocherlakota, 1997. "Dynamic games with hidden actions and hidden states," Working Papers 583, Federal Reserve Bank of Minneapolis.
  15. Radner, Roy, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 43-57, January.
  16. Claudio Mezzetti, 2007. "Mechanism Design with Interdependent Valuations: Surplus Extraction," Economic Theory, Springer, vol. 31(3), pages 473-488, June.
  17. Fang, Hanming & Norman, Peter, 2005. "To Bundle or Not to Bundle," Microeconomics.ca working papers norman-05-06-10-08-19-02, Vancouver School of Economics, revised 10 Jun 2005.
  18. Matthew O Jackson & Hugo F Sonnenschein, 2007. "Overcoming Incentive Constraints by Linking Decisions -super-1," Econometrica, Econometric Society, vol. 75(1), pages 241-257, 01.
  19. Gossner, Olivier & Hörner, Johannes, 2010. "When is the lowest equilibrium payoff in a repeated game equal to the minmax payoff?," Journal of Economic Theory, Elsevier, vol. 145(1), pages 63-84, January.
  20. repec:rje:randje:v:37:y:2006:i:4:p:946-963 is not listed on IDEAS
  21. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-98, July.
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