The Castle on the Hill

David Knudsen Levine ()

Review of Economic Dynamics, 2000, vol. 3, issue 2, pages 330-337

Abstract: A simple example of a stochastic games with irreversibility is studied and it is shown that the folk theorem fails in a robust way. In this game of Castle on the Hill, for a broad range of discount factors, including those close to me, equilibrium is unique. Moreover, the equilibrium for large discount factors is Pareto dominated by the equilibrium for low discount factors. A unique cyclic equilibrium is also possible for intermediate ranges of discount factors. (Copyright: Elsevier)

Date: 2000
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