Markov perfection and cooperation in repeated games
Markov perfection has become the usual solution concept to determine the non-cooperative equilibrium in a dynamic game. However, Markov perfection is a stronger solution concept than subgame perfection: Markov perfection rules out any cooperation in a repeated prisoners' dilemma game because the history of previous cooperation does neither change the future action space nor the possible payoffs in this setting. This paper demonstrates that a dynamic modelling approach may sustain cooperation by Markov perfect strategies in situations which are usually modelled as repeated prisoners' dilemma games. The idea is that past defection from cooperation changes a compliance state variable which enters the utility function. The corresponding dynamic games are discussed for the trigger strategy and for a strategy which is weakly renegotiation-proof. Finally, the paper shows that dynamic game modelling improves the chances for strong renegotiation-proofness in the corresponding repeated game.
|Date of creation:||1996|
|Date of revision:|
|Contact details of provider:|| Postal: Kiellinie 66, D-24105 Kiel|
Phone: +49 431 8814-1
Fax: +49 431 85853
Web page: http://www.ifw-kiel.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Evans, Robert & Maskin, Eric, 1989. "Efficient renegotiation--proof equilibria in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 361-369, December.
- Farrell, Joseph & Maskin, Eric, 1989.
"Renegotiation in repeated games,"
Games and Economic Behavior,
Elsevier, vol. 1(4), pages 327-360, December.
- Joseph Farrell and Eric Maskin., 1987. "Renegotiation in Repeated Games," Economics Working Papers 8759, University of California at Berkeley.
- Farrell, Joseph & Maskin, Eric, 1987. "Renegotiation in Repeated Games," Department of Economics, Working Paper Series qt9wv3h5jb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
- Mohr, Ernst, 1988. "On the Incredibility of Perfect Threats in Repeated Games: Note," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 551-55, August.
- Gary S. Becker & Kevin M. Murphy, 1986.
"A Theory of Rational Addiction,"
University of Chicago - George G. Stigler Center for Study of Economy and State
41, Chicago - Center for Study of Economy and State.
- Dutta Prajit K., 1995. "Collusion, Discounting and Dynamic Games," Journal of Economic Theory, Elsevier, vol. 66(1), pages 289-306, June.
- van Damme, Eric, 1989.
"Renegotiation-proof equilibria in repeated prisoners' dilemma,"
Journal of Economic Theory,
Elsevier, vol. 47(1), pages 206-217, February.
- van Damme,Eric, 1986. "Renegotiation-proof equilibria in repeated Prisoner`s dilemma," Discussion Paper Serie A 84, University of Bonn, Germany.
- van Damme, E.E.C., 1989. "Renegotiation-proof equilibria in repeated prisoners' dilemma," Other publications TiSEM df9180a1-537e-4331-9f2a-7, Tilburg University, School of Economics and Management.
- Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
- Douglas Bernheim, B. & Ray, Debraj, 1989. "Collective dynamic consistency in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 295-326, December.
When requesting a correction, please mention this item's handle: RePEc:kie:kieliw:760. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.