Perfect Public Equilibrium When Players Are Patient

We provide a characterization of the limit set of perfect public equilibrium payoffs of repeated games with imperfect public monitoring as the discount factor goes to one. Our result covers general stage games including those that fail a “full-dimensionality†condition that had been imposed in past work. It also provides a characterization of the limit set when the strategies are restricted in a way that endogenously makes the full-dimensionality condition fail, as in the strongly symmetric equilibrium studied by Abreu [Abreu, D., 1986. Extremal equilibria of oligopolistic supergames. J. Econ. Theory 39, 191–228] and Abreu et al. [Abreu, D., Pearce, D., Stacchetti, E., 1986. Optimal cartel equilibria with imperfect monitoring. J. Econ. Theory 39, 251–269]. Finally, we use our characterization to give a sufficient condition for the exact achievability of first-best outcomes. Equilibria of this type, for which all continuation payoffs lie on the Pareto frontier, have a strong renegotiation-proofness property: regardless of the history, players can never unanimously prefer another equilibrium.