ECON 2052 Spring Lecture 4
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Repeated Games No tangible link between periods, but players can condition current play on their information about past actions; can allow new equilibria because players know have the ability to "r... eward" or "punish" opponents. Repeating the game doesn’t get rid of any equilibrium outcomes- always have the static equilibria, which correspond to small discount factors. Point is to see what happens when the discount factor is not small. Hard to characterize equilibrium set for fixed discount factor unless exact efficiency is possible- which it usually isn’t except with perfect monitoring. (but can be computed and characterized e.g. Cronshaw [1997], Judd, Yeltekin, Conklin [2003], Abreu and Sannikov [2013] .) Strongest conclusions when discount factor is very close to 1, and the game is infinitely repeated- here we have the “folk theorems:” every feasible IR payoff vector can be supported by an equilibrium. 2 In repeated games with observed actions the folk theorem can be proved constructively. And observed-actions constructions have been adapted to “almost perfectly observed” settings, (Hörner-Olszewski [2006]) as well as to stochastic games with observed actions (Dutta [1995]) Constructive approach harder to apply when not proving folk theorem as need need some (other) upper bound on equilibrium set. Hard to say how people “really” play repeated games; some experimental results by Dal Bo and Frechette [2011], Fudenberg, Dreber, Rand [2012], etc. 3 Repeated Games with Public Monitoring [Show More]
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