Discounted stochastic games with voluntary transfers

Susanne Goldlücke and Sebastian Kranz

Economic Theory, 2018, vol. 66, issue 1, No 9, 235-263

Abstract: Abstract This paper studies discounted stochastic games with perfect or imperfect public monitoring and the opportunity to conduct voluntary monetary transfers and possibly burn money. This generalization of repeated games with transfers is ideally suited to study relational contracting in applications with long-term investments and also allows to study collusive industry dynamics. We show that for all discount factors every perfect public equilibrium payoff can be implemented with a class of simple equilibria that have a stationary structure on the equilibrium path and optimal penal codes with a stick-and-carrot structure. We develop an algorithm for perfect monitoring to compute the set of equilibrium payoffs and find simple equilibria that implement these payoffs.

Keywords: Dynamic games; Relational contracting; Monetary transfers; Computation; Imperfect public monitoring; Perfect public equilibria (search for similar items in EconPapers)
JEL-codes: C61 C63 C73 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Discounted Stochastic Games with Voluntary Transfers (2012)
Working Paper: Discounted Stochastic Games with Voluntary Transfers (2012)
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DOI: 10.1007/s00199-017-1060-1

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