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When and How the Punishment Must Fit the Crime

Author

Listed:
  • George J.Mailath

    () (Department of Economics and PIER, University of Pennsylvania, and Research School of Economics, Australian National University)

  • Volker Nocke

    () (University of Mannheim, CESifo and CEPR)

  • Lucy White

    () (Harvard Business School and CEPR)

Abstract

In repeated normal-form (simultaneous-move) games, simple penal codes (Abreu, 1986, 1988) permit an elegant characterization of the set of subgame-perfect outcomes. We show that the logic of simple penal codes fails in repeated extensive-form games. By means of examples, we identify two types of settings in which a subgame-perfect outcome may be supported only by a profile with the property that the continuation play after a deviation is tailored not only to the identity of the deviator, but also to the nature of the deviation.

Suggested Citation

  • George J.Mailath & Volker Nocke & Lucy White, 2015. "When and How the Punishment Must Fit the Crime," PIER Working Paper Archive 15-008, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  • Handle: RePEc:pen:papers:15-008
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:indorg:v:53:y:2017:i:c:p:99-113 is not listed on IDEAS
    2. Sebastian Schweighofer-Kodritsch, 2015. "Time Preferences and Bargaining," STICERD - Theoretical Economics Paper Series /2015/568, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    3. Biancini, Sara & Ettinger, David, 2017. "Vertical integration and downstream collusion," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 99-113.

    More about this item

    Keywords

    Simple Penal Code; Subgame Perfect Equilibrium; Repeated Extensive Game; Optimal Punishment.;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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