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Instability of Equilibria with Imperfect Private Monitoring

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  • Heller, Yuval

Abstract

Various papers have presented folk-theorem results that yield efficiency in the repeated Prisoner's Dilemma with imperfect private monitoring. I present a mild equilibrium refinement that requires robustness against small perturbations in the behavior of potential opponents, and I show that only defection satisfies this mild refinement among all the equilibria in the existing literature, unless one assumes either (1) communication among the players, or (2) sufficient correlation between the private signals (conditional on the action-profile).

Suggested Citation

  • Heller, Yuval, 2015. "Instability of Equilibria with Imperfect Private Monitoring," MPRA Paper 64468, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:64468
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    References listed on IDEAS

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    3. Johannes Hörner & Wojciech Olszewski, 2006. "The Folk Theorem for Games with Private Almost-Perfect Monitoring," Econometrica, Econometric Society, vol. 74(6), pages 1499-1544, November.
    4. Michihiro Kandori & Ichiro Obara, 2006. "Efficiency in Repeated Games Revisited: The Role of Private Strategies," Econometrica, Econometric Society, vol. 74(2), pages 499-519, March.
    5. Michihiro Kandori, 2011. "Weakly Belief‐Free Equilibria in Repeated Games With Private Monitoring," Econometrica, Econometric Society, vol. 79(3), pages 877-892, May.
    6. Ely, Jeffrey C. & Valimaki, Juuso, 2002. "A Robust Folk Theorem for the Prisoner's Dilemma," Journal of Economic Theory, Elsevier, vol. 102(1), pages 84-105, January.
    7. Mailath, George J. & Morris, Stephen, 2002. "Repeated Games with Almost-Public Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 189-228, January.
    8. V. Bhaskar & George J. Mailath & Stephen Morris, 2008. "Purification in the Infinitely-Repeated Prisoners' Dilemma," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 515-528, July.
    9. Mailath, George J. & Morris, Stephen, 2006. "Coordination failure in repeated games with almost-public monitoring," Theoretical Economics, Econometric Society, vol. 1(3), pages 311-340, September.
    10. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-554, May.
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    More about this item

    Keywords

    Belief-free equilibrium; evolutionary stability; imperfect private monitoring; repeated Prisoner's Dilemma; communication.;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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