Truthful Equilibria in Dynamic Bayesian Games
74 Pages Posted: 22 Dec 2013
Date Written: December 20, 2013
This paper characterizes an equilibrium payoff subset for Markovian games with private information as discounting vanishes. Monitoring is imperfect, transitions may depend on actions, types be correlated and values interdependent. The focus is on equilibria in which players report truthfully. The characterization generalizes that for repeated games, reducing the analysis to static Bayesian games with transfers. With correlated types, results from mechanism design apply, yielding a folk theorem. With independent private values, the restriction to truthful equilibria is without loss, except for the punishment level; if players withhold their information during punishment-like phases, a “folk” theorem obtains also.
Keywords: Bayesian games, repeated games, folk theorem
JEL Classification: C72, C73
Suggested Citation: Suggested Citation