Robustness to incomplete information in repeated games

Sylvain Chassang, Satoru Takahashi

    Research output: Contribution to journalArticle

    Abstract

    This paper extends the framework of Kajii and Morris (1997) to study the question of robustness to incomplete information in repeated games. We show that dynamically robust equilibria can be characterized using a one-shot robustness principle that extends the one-shot deviation principle. Using this result, we compute explicitly the set of dynamically robust equilibrium values in the repeated prisoners' dilemma. We show that robustness requirements have sharp intuitive implications regarding when cooperation can be sustained, what strategies are best suited to sustain cooperation, and how changes in payoffs affect the sustainability of cooperation. We also show that a folk theorem in dynamically robust equilibria holds, but requires stronger identifiability conditions than the pairwise full rank condition of Fudenberg et al. (1994).

    Original languageEnglish (US)
    Pages (from-to)49-93
    Number of pages45
    JournalTheoretical Economics
    Volume6
    Issue number1
    DOIs
    StatePublished - Jan 2011

    Keywords

    • Folk theorem
    • One-shot robustness principle
    • Repeated prisoners' dilemma
    • Robustness to incomplete information
    • Selective punishment

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

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