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Recursive structure and equilibria in games with private monitoring

Amarante, Massimiliano

In each stage of a repeated game with private monitoring, the players receive payoffs and privately observe signals which depend on the players' actions and the state of world. I show that, contrary to a widely held belief, such games admit a recursive structure. More precisely, I construct a representation of the original sequential problem as a sequence of static games with incomplete information. This establishes the ground for a characterization of strategies and, hence, of behavior in interactive decision settings where private information is present. Finally, the representation is used to give a recursive characterization of the equilibrium payoff set, by means of a multi-player generalization of dynamic programming.

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Academic Units
Economics
Publisher
Department of Economics, Columbia University
Series
Department of Economics Discussion Papers, 0102-48
Published Here
March 23, 2011

Notes

April 2002

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