The Folk Theorem for Repeated Games with Observation Costs

Eiichi Miyagawa, Yasuyuki Miyahara () and Tadashi Sekiguchi
Additional contact information
Yasuyuki Miyahara: Graduate School of Business Administration, Kobe University

No 597, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper studies repeated games with private monitoring where players make optimal decisions with respect to costly monitoring activities, just as they do with respect to stage-game actions. We consider the case where each player can observe other players' current-period actions accurately only if he incurs a certain level of disutility. In every period, players decide whether to monitor other players and whom to monitor. We show that the folk theorem holds for any finite stage game that satisfies the standard full dimensionality condition and for any level of observation costs. The theorem also holds under general structures of costless private signals and does not require explicit communication among the players. Therefore, tacit collusion can attain efficient outcomes in general repeated games with private monitoring if perfect private monitoring is merely feasible, however costly it may be.

Keywords: Repeated games; private monitoring; costly monitoring; tacit collusion; communication; secret price cuts (search for similar items in EconPapers)
JEL-codes: C72 C73 D43 D82 K21 L13 L40 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2004-11
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: The folk theorem for repeated games with observation costs (2008)
Working Paper: The Folk Theorem for Repeated Games with Observation Costs (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:597

Access Statistics for this paper

More papers in KIER Working Papers from Kyoto University, Institute of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Makoto Watanabe ().