Balanquit, Romeo (2010): Tolerance, Cooperation, and Equilibrium Restoration in Repeated Games.
Download (304Kb) | Preview
This study shows that in a two-player infinitely repeated game where one is patient and the other is impatient, Pareto-superior subgame perfect equilibrium can be achieved. An impatient player in this paper is depicted as someone who can truly destroy the possibility of attaining any feasible and individually rational outcome that is supported in equilibrium in repeated games, as asserted by the Folk Theorem. In this scenario, the main ingredient for the restoration of equilibrium is to introduce the notion of tolerant trigger strategy. Consequently, the use of the typical trigger strategy is abandoned since it ceases to be efficient as it only brings automatically the game to its punishment path, therefore eliminating the possibility of extracting other feasible equilibria. I provide a simple characterization of perfect equilibrium payoffs under this scenario and show that cooperative outcome can be approximated.
|Item Type:||MPRA Paper|
|Original Title:||Tolerance, Cooperation, and Equilibrium Restoration in Repeated Games|
|Keywords:||infinitely-repeated games; tolerant trigger strategy|
|Subjects:||C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
|Depositing User:||Romeo Balanquit|
|Date Deposited:||07. Apr 2010 09:49|
|Last Modified:||25. Feb 2013 17:15|
Abreu, D. (1988), “On the Theory of Infinitely Repeated Games with Discounting”, Econometrica, vol.56, no. 2, pp.383-396.
_____ (1986), “Extremal Equilibria of Oligopolistic Supergames”, Journal of Economic Theory, 39:191:225.
Aumann, R. and L. Shapley (1976), “Long Term Competition: A Game Theoretic Analysis”, mimeo, Hebrew University.
Benoit, J.P. and V. Krishna (1985), “Finitely Repeated Games”, Econometrica, vol.53, no.4, pp.905-922.
Friedman, J. (1971), “A Noncooperative Equilibrium for Supergames”, Review of Economic Studies, 38:1-12.
Fudenberg, D. and E. Maskin (1986), “The Folk Theorem in Repeated Games with Discounting or with Complete Information”, Econometrica, vol. 54, no.3, pp.533-554.
________ (1991), “On the Dispensability of Public Randomization in Discounted Repeated Games”. Journal of Economic Theory, 53(2):428-438.
Fudenberg, D., D. Kreps, E. Maskin (1990), “Repeated Games with Long-run and Short-run Players”, Review of Economic Studies, 57:557-573.
Lehrer, E. and A. Pauzner (1999), “Repeated Games with Differential Time Preferences”, Econometrica, vol. 67, no.2, pp.393-412.
Rubinstein, A (1979), “Equilibrium in Supergames with the Overtaking Criterion”, Journal of Economic Theory, 21: 1-9.
Available Versions of this Item
- Tolerance, Cooperation, and Equilibrium Restoration in Repeated Games. (deposited 07. Apr 2010 09:49) [Currently Displayed]