Home

Repeated games with observation costs

Eiichi Miyagawa; Yasuyuki Miyahara; Tadashi Sekiguchi

Title:
Repeated games with observation costs
Author(s):
Miyagawa, Eiichi
Miyahara, Yasuyuki
Sekiguchi, Tadashi
Date:
Type:
Working papers
Department:
Economics
Permanent URL:
Series:
Department of Economics Discussion Papers
Part Number:
0203-14
Publisher:
Department of Economics, Columbia University
Publisher Location:
New York
Abstract:
This paper analyzes repeated games in which it is possible for players to observe the other players' past actions without noise but it is costly. One's observation decision itself is not observable to the other players, and this private nature of monitoring activity makes it difficult to give the players proper incentives to monitor each other. We provide a sufficient condition for a feasible payoff vector to be approximated by a sequential equilibrium when the observation costs are sufficiently small. We then show that this result generates an approximate Folk Theorem for a wide class of repeated games with observation costs. The Folk Theorem holds for a variant of prisoners' dilemma, partnership games, and any games in which the players have an ability to "burn" small amounts of their own payoffs.
Subject(s):
Economic theory
Item views:
159
Metadata:
text | xml

In Partnership with the Center for Digital Research and Scholarship at Columbia University Libraries/Information Services | Terms of Use