The Maximum Efficient Equilibrium Payoff in the Repeated Prisoners' Dilemma

26 Pages Posted: 2 May 2001

See all articles by George J. Mailath

George J. Mailath

University of Pennsylvania - Department of Economics; Research School of Economics, ANU

Ichiro Obara

University of California, Los Angeles (UCLA) - Department of Economics

Tadashi Sekiguchi

Kobe University; Kyoto University - Institute of Economic Research

Date Written: November 16, 2000

Abstract

We describe the maximum efficient subgame perfect equiligrium payoff for a player in the repeated Prisoners' Dilemma, as a function of the discount factor. For discount factors above a critical level, every efficient, feasible, individually rational payoff profile can be sustained. For an open and dense subset of discount factors below the critical value, the maximum efficient payoff is not an equilibrium payoff. When a player cannot achieve this payoff, the unique equilibrium outcome achieving the best efficient equilibrium payoff for a player is eventually cyclic. There is an uncountable number of discount factors below the critical level such that the maximum efficient payoff is an equilibrium payoff.

Keywords: Equilibrium Payoffs, Perfect Monitoring

JEL Classification: C72, C73

Suggested Citation

Mailath, George J. and Obara, Ichiro and Sekiguchi, Tadashi and Sekiguchi, Tadashi, The Maximum Efficient Equilibrium Payoff in the Repeated Prisoners' Dilemma (November 16, 2000). Available at SSRN: https://ssrn.com/abstract=267775 or http://dx.doi.org/10.2139/ssrn.267775

George J. Mailath (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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Philadelphia, PA 19104-6297
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HOME PAGE: http://web.sas.upenn.edu/gmailath/

Research School of Economics, ANU ( email )

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Australia

Ichiro Obara

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

Tadashi Sekiguchi

Kobe University ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501, 657-8501
Japan

Kyoto University - Institute of Economic Research ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto 606-8501
Japan

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