Cooperation in an Infinite-Horizon Centipede Game

30 Pages Posted: 25 Oct 2006  

David A. Malueg

University of California Riverside

Date Written: October 23, 2006

Abstract

An infinite-horizon perfect-information "centipede" game is studied. The unique subgame-perfect Nash equilibrium (SPNE) in pure strategies has each player choose, at each opportunity, to terminate the game. In contrast, mixed strategies can yield equilibrium cooperation described as follows: for all but finitely many periods players randomize between terminating and continuing the game. These continuation probabilities are explicitly calculated. If both players' payoff functions are unbounded, then there exist SPNE exhibiting such cooperation. Conditions are also derived under which such cooperation does not arise.

Keywords: centipede game, cooperation

JEL Classification: C72, C73

Suggested Citation

Malueg, David A., Cooperation in an Infinite-Horizon Centipede Game (October 23, 2006). Available at SSRN: https://ssrn.com/abstract=939596 or http://dx.doi.org/10.2139/ssrn.939596

David A. Malueg (Contact Author)

University of California Riverside ( email )

Economics Department
3136 Sproul Hall
Riverside, CA 92505
United States
951 827 1494 (Phone)

Paper statistics

Downloads
165
Rank
148,621
Abstract Views
812