Characterizing Belief-Free Review-Strategy Equilibrium Payoffs Under Conditional Independence
University of Pennsylvania; Harvard University
February 22, 2012
PIER Working Paper No. 12-005
This paper proposes and studies a tractable subset of Nash equilibria, belief-free review-strategy equilibria, in repeated games with private monitoring. The payoff set of this class of equilibria is characterized in the limit as the discount factor converges to one for games where players observe statistically independent signals. As an application, we develop a simple sufficient condition for the existence of asymptotically efficient equilibria, and establish a folk theorem for N-player prisoner’s dilemma. All these results are robust to a perturbation of the signal distribution, and hence remain true even under almost-independent monitoring.
Number of Pages in PDF File: 74
Keywords: repeated game, private monitoring, conditional independence, belief-free
JEL Classification: C72, C73, D82
Date posted: February 27, 2012
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