Belief Free Equilibria

12 Pages Posted: 11 May 2013

See all articles by Olivier Compte

Olivier Compte

Paris School of Economics (PSE); Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS)

Andrew Postlewaite

University of Pennsylvania - Department of Economics

Date Written: May 10, 2013

Abstract

The repeated game literature studies long run/repeated interactions, aiming to understand how repetition may foster cooperation. Conditioning future behavior on past play is crucial in this endeavor. For most situations of interest a given player does not directly observe the actions chosen by other players and must rely on noisy signals he receives about those actions. This is typically incorporated into models by defining a monitoring structure, that is, a collection of probability distributions over the signals each player receives (one distribution for each action profile players may play). Although this is simply meant to capture the fact that players don.t directly observe the actions chosen by others, constructed equilibria often depend on players precisely knowing the distributions, somewhat unrealistic in most problems of interest. This paper aims to show the fragility of belief free equilibrium constructions when one adds shocks to the monitoring structure in repeated games.

Keywords: Repeated games, folk theorem, belief free, robustness

JEL Classification: C72, C73

Suggested Citation

Compte, Olivier and Postlewaite, Andrew, Belief Free Equilibria (May 10, 2013). PIER Working Paper No. 13-020, Available at SSRN: https://ssrn.com/abstract=2263266 or http://dx.doi.org/10.2139/ssrn.2263266

Olivier Compte

Paris School of Economics (PSE)

48 Boulevard Jourdan
Paris, 75014 75014
France

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

28, rue des Saints-Peres
75007 Paris
France

Andrew Postlewaite (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-7350 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.econ.upenn.edu/~apostlew

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