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Individual Learning and Cooperation in Noisy Repeated Games

  • Yuichi Yamamoto

    ()

    (Department of Economics, University of Pennsylvania)

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    We investigate whether two players in a long-run relationship can maintain cooperation when the details of the underlying game are unknown. Specifically, we consider a new class of repeated games with private monitoring, where an unobservable state of the world influences the payoff functions and/or the monitoring structure. Each player privately learns the state over time, but cannot observe what the opponent learns. We show that there are robust equilibria where players eventually obtain payoffs as if the true state were common knowledge and players played a “belief-free” equilibrium. The result is applied to various examples, including secret pricecutting with unknown demand.

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    File URL: http://economics.sas.upenn.edu/system/files/12-044.pdf
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    Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-044.

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    Length: 76 pages
    Date of creation: 10 Nov 2012
    Date of revision:
    Handle: RePEc:pen:papers:12-044
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    4. George J. Mailath & Stephen Morris, 1999. "Repeated Games with Almost-Public Monitoring," CARESS Working Papres almost-pub, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences, revised 01 Sep 2000.
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    9. Hörner, Johannes & Lovo, Stefano & Tomala, Tristan, 2011. "Belief-free equilibria in games with incomplete information: Characterization and existence," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1770-1795, September.
    10. Fudenberg, Drew & Yamamoto, Yuichi, 2010. "Repeated Games Where the Payoffs and Monitoring Structure Are Unknown," Scholarly Articles 13411374, Harvard University Department of Economics.
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    29. Yuichi Yamamoto, 2012. "Characterizing Belief-Free Review-Strategy Equilibrium Payoffs under ConditionalIndependence," PIER Working Paper Archive 12-005, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    30. Yamamoto, Yuichi, 2012. "Characterizing belief-free review-strategy equilibrium payoffs under conditional independence," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1998-2027.
    31. repec:cor:louvrp:-636 is not listed on IDEAS
    32. Yamamoto, Yuichi, 2009. "A limit characterization of belief-free equilibrium payoffs in repeated games," Journal of Economic Theory, Elsevier, vol. 144(2), pages 802-824, March.
    33. Joseph E. Harrington, Jr. & Andrzej Skrzypacz, 2009. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices," Economics Working Paper Archive 555, The Johns Hopkins University,Department of Economics.
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