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Layoffs and Quits in Repeated Games

  • Pablo Casas-Arce
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    This paper studies games in which the players are not locked into their relationship for a fixed number of periods. We consider two-player games where player 1 can decide to let the opponent continue in the game or replace it with a new player. We also allow the possibility of player 2 quitting the game. When only layoffs can occur, cooperation takes place in finite horizons due to the threat that termination of the relationship imposes on player 2. However, quits limit that cooperation to those cases where the outside option for player 2 is small (lower than some Nash equilibrium of the stage game).

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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper199.pdf
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    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 199.

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    Date of creation: 01 Jul 2004
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    Handle: RePEc:oxf:wpaper:199
    Contact details of provider: Postal: Manor Rd. Building, Oxford, OX1 3UQ
    Web page: http://www.economics.ox.ac.uk/
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    1. Jonathan Levin, 2003. "Relational Incentive Contracts," American Economic Review, American Economic Association, vol. 93(3), pages 835-857, June.
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    6. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Maskin, Eric & Kreps, David & Fudenberg, Drew, 1990. "Repeated Games with Long-run and Short-run Players," Scholarly Articles 3226950, Harvard University Department of Economics.
    8. Benoit, Jean-Pierre & Krishna, Vijay, 1985. "Finitely Repeated Games," Econometrica, Econometric Society, vol. 53(4), pages 905-22, July.
    9. Smith, L., 1994. "Necessary and Sufficient Conditions for the Perfect Finite Horizon Folk Theorem," Working papers 94-17, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
    11. 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.
    12. Kandori, Michihiro, 1992. "Repeated Games Played by Overlapping Generations of Players," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 81-92, January.
    13. Glen Ellison, 2010. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Levine's Working Paper Archive 631, David K. Levine.
    14. Abreu, Dilip & Dutta, Prajit K & Smith, Lones, 1994. "The Folk Theorem for Repeated Games: A NEU Condition," Econometrica, Econometric Society, vol. 62(4), pages 939-48, July.
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