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: |
Phone: +49 431 8814-1
Fax: +49 431 85853
Web page: http://www.ifw-kiel.de
More information through EDIRC
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.:
- Joseph Farrell and Eric Maskin., 1987.
"Renegotiation in Repeated Games,"
Economics Working Papers
8759, University of California at Berkeley.
- Douglas Bernheim, B. & Ray, Debraj, 1989. "Collective dynamic consistency in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 295-326, December.
- Evans, Robert & Maskin, Eric, 1989. "Efficient renegotiation--proof equilibria in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 361-369, December.
- 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.
- Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
- 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.
- van Damme,Eric, 1986.
"Renegotiation-proof equilibria in repeated Prisoner`s dilemma,"
Discussion Paper Serie A
84, University of Bonn, Germany.
- 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, 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.
- Dutta Prajit K., 1995. "Collusion, Discounting and Dynamic Games," Journal of Economic Theory, Elsevier, vol. 66(1), pages 289-306, June.
- 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.
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 references are entirely missing, you can add them using this form.