An Impossibility Theorem in Repeated Games

14 Pages Posted: 28 Nov 2016

See all articles by Costas Cavounidis

Costas Cavounidis

Boston University

Sambuddha Ghosh

Boston University - Department of Economics

Date Written: November 24, 2016

Abstract

We prove a negative result in repeated games which shows that a sizable part of the set of feasible individually rational payoffs can never be supported by strategies that are at all robust to players’ discount factors. We find the cutoff defining this region and interpret it as a limit on the ability to punish deviations when future rewards for randomization cannot be finely calibrated. Furthermore, we present a robust folk theorem to support payoffs in the complementary region with “Blackwell-Nash” strategies that remain SPNE at all greater discount factors.

Keywords: Game Theory, Repeated Games, Discounting, Robustness, Folk Theorem

JEL Classification: C73

Suggested Citation

Cavounidis, Costas and Ghosh, Sambuddha, An Impossibility Theorem in Repeated Games (November 24, 2016). Available at SSRN: https://ssrn.com/abstract=2875565 or http://dx.doi.org/10.2139/ssrn.2875565

Costas Cavounidis (Contact Author)

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Sambuddha Ghosh

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

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