Reputation in Repeated Moral Hazard Games

Atakan, Alp Enver and Ekmekci, Mehmet (2014): Reputation in Repeated Moral Hazard Games.

Abstract

We study an infinitely repeated game where two players with equal discount factors play a simultaneous-move stage game. Player one monitors the stage- game actions of player two imperfectly, while player two monitors the pure stage- game actions of player one perfectly. Player one’s type is private information and he may be a “commitment type,” drawn from a countable set of commitment types, who is locked into playing a particular strategy. Under a full-support assumption on the monitoring structure, we prove a reputation result for repeated moral hazard games: if there is positive probability that player one is a particular type whose commitment payoff is equal to player one’s highest payoff, consistent with the players’ individual rationality, then a patient player one secures this type’s commitment payoff in any Bayes-Nash equilibrium of the repeated game.

• Item Type: MPRA Paper
• Language: English
• Keywords: Repeated Games, Reputation, Equal Discount Factor, Long-run Players, Imperfect Monitoring, Complicated Types, Finite Automaton
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games; D - Microeconomics > D0 - General

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