Designing Efficient Resource Sharing For Impatient Players Using Limited Monitoring

Mihaela van der Schaar, Yuanzhang Xiao and William Zame
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Mihaela van der Schaar: Electrictal Engineering, UCLA
Yuanzhang Xiao: Electrictal Engineering, UCLA

No 1320, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: The problem of efficient sharing of a resource is nearly ubiquitous. Except for pure public goods, each agent's use creates a negative externality; often the negative externality is so strong that efficient sharing is impossible in the short run. We show that, paradoxically, the impossibility of efficient sharing in the short run enhances the possibility of efficient sharing in the long run, even if outcomes depend stochastically on actions, monitoring is limited and users are not patient. We base our analysis on the familiar framework of repeated games with imperfect public monitoring, but we extend the framework to view the monitoring structure as chosen by a designer who balances the benefits and costs of more accurate observations and reports. Our conclusions are much stronger than in the usual folk theorems: we do not require a rich signal structure or patient users and provide an explicit online construction of equilibrium strategies.

Pages: 65 pages
Date: 2013, Revised 2013-08
New Economics Papers: this item is included in nep-cta, nep-mic and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eie:wpaper:1320

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