Incredibility of perfect threats in repeated games: The dilemma of a rational player

Ernst Mohr

No 202, Discussion Papers, Series I from University of Konstanz, Department of Economics

Abstract: The implicit assumption made when deterrence solutions to repeated games are constructed, is that perfectness is a sufficient condition for the credibility of threats. In this paper it is shown that the validity of this assumption hinges on another assumption which proves to be unsatisfactory - namely that players exhibit a different rationality at different stages of the game. A consequence of making rationality independent of time is that sufficient conditions for the credibility of threats fail to exist.

Date: 1985
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