Global Dynamics in Repeated Games with Additively Separable Payoffs
This paper studies the global dynamics of a class of infinitely repeated two-player games in which the action space of each player is an interval, and the one-shot payoff of each player is additively separable in their actions. We define an immediately reactive equilibrium (IRE) as a pure-strategy subgame perfect equilibrium such that each player's action is a stationary function of the opponent's last action. We completely characterize IREs and their dynamics in terms of certain indifference curves. Our results are used to show that in a prisoners' dilemma game with observable mixed strategies, gradual cooperation occurs when the players are sufficiently patient, and that in a certain duopoly game, kinked demand curves emerge naturally.
|Date of creation:||Feb 2010|
|Date of revision:||Jun 2010|
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- Taiji Furusawa, 2001. "Threats and Concessions in Tariff Settings," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-123, Boston University - Department of Economics.
- Haller, Hans & Lagunoff, Roger, 2010.
"Markov Perfect equilibria in repeated asynchronous choice games,"
Journal of Mathematical Economics,
Elsevier, vol. 46(6), pages 1103-1114, November.
- Roger Lagunoff & Hans Haller, 1997. "Markov Perfect Equilibria in Repeated Asynchronous Choice Games," Game Theory and Information 9707006, EconWPA.
- Hans Haller & Roger Lagunoff, 2006. "Markov Perfect Equilibria in Repeated Asynchronous Choice Games," Levine's Bibliography 321307000000000560, UCLA Department of Economics.