Repeated Games with Frequent Signals-super-*

Drew Fudenberg and David K. Levine
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David K. Levine: Department of Economics, Washington University in St. Louis

The Quarterly Journal of Economics, 2009, vol. 124, issue 1, pages 233-265

Abstract: We study repeated games with frequent actions and frequent imperfect public signals, where the signals are aggregates of many discrete events, such as sales or tasks. The high-frequency limit of the equilibrium set depends both on the probability law governing the discrete events and on how many events are aggregated into a single signal. When the underlying events have a binomial distribution, the limit equilibria correspond to the equilibria of the associated continuous-time game with diffusion signals, but other event processes that aggregate to a diffusion limit can have a different set of limit equilibria. Thus the continuous-time game need not be a good approximation of the high-frequency limit when the underlying events have three or more possible values. (c) 2009 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

Date: 2009

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