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Designing Efficient Resource Sharing For Impatient Players Using Limited Monitoring

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Listed:
  • Mihaela van der Schaar

    (Electrictal Engineering, UCLA)

  • Yuanzhang Xiao

    (Electrictal Engineering, UCLA)

  • William Zame

    (Economics, UCLA)

Abstract

The problem of efficient sharing of a resource is nearly ubiquitous. Except for pure public goods, each agent's use creates a negative externality; often the negative externality is so strong that efficient sharing is impossible in the short run. We show that, paradoxically, the impossibility of efficient sharing in the short run enhances the possibility of efficient sharing in the long run, even if outcomes depend stochastically on actions, monitoring is limited and users are not patient. We base our analysis on the familiar framework of repeated games with imperfect public monitoring, but we extend the framework to view the monitoring structure as chosen by a designer who balances the benefits and costs of more accurate observations and reports. Our conclusions are much stronger than in the usual folk theorems: we do not require a rich signal structure or patient users and provide an explicit online construction of equilibrium strategies.

Suggested Citation

  • Mihaela van der Schaar & Yuanzhang Xiao & William Zame, 2013. "Designing Efficient Resource Sharing For Impatient Players Using Limited Monitoring," EIEF Working Papers Series 1320, Einaudi Institute for Economics and Finance (EIEF), revised Aug 2013.
  • Handle: RePEc:eie:wpaper:1320
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    File URL: http://www.eief.it/files/2013/09/wp-20-designing-efficient-resource-sharing-for-impatient-players-using-limited-monitoring.pdf
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    References listed on IDEAS

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    1. Drew Fudenberg & David K. Levine & Satoru Takahashi, 2008. "Perfect public equilibrium when players are patient," World Scientific Book Chapters,in: A Long-Run Collaboration On Long-Run Games, chapter 16, pages 345-367 World Scientific Publishing Co. Pte. Ltd..
    2. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    3. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-465, Autumn.
    4. Blume, Lawrence E & Zame, William R, 1994. "The Algebraic Geometry of Perfect and Sequential Equilibrium," Econometrica, Econometric Society, vol. 62(4), pages 783-794, July.
    5. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
    6. Mailath, George J. & Obara, Ichiro & Sekiguchi, Tadashi, 2002. "The Maximum Efficient Equilibrium Payoff in the Repeated Prisoners' Dilemma," Games and Economic Behavior, Elsevier, vol. 40(1), pages 99-122, July.
    7. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
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