Switching costs in infinitely repeated games

Barton Lipman () and Ruqu Wang ()

Games and Economic Behavior, 2009, vol. 66, issue 1, pages 292-314

Abstract: We show that small switching costs can have surprisingly dramatic effects in infinitely repeated games if these costs are large relative to payoffs in a single period. This shows that the results in Lipman and Wang do have analogs in the case of infinitely repeated games [Lipman, B., Wang, R., 2000. Switching costs in frequently repeated games. J. Econ. Theory 93, August 2000, 149-190]. We also discuss whether the results here or those in Lipman-Wang imply a discontinuity in the equilibrium outcome correspondence with respect to small switching costs. We conclude that there is not a discontinuity with respect to switching costs but that the switching costs do create a discontinuity with respect to the length of a period.

Date: 2009

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Related works:
Working Paper: Switching Costs in Infinitely Repeated Games1 (2006)
Working Paper: Switching Costs in Infinitely Repeated Games (2006)
Working Paper: Switching Costs in Infinitely Repeated Games (2006)
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