Repeated Games with Frequent Signals

Drew Fudenberg and David Levine

The Quarterly Journal of Economics, 2009, vol. 124, issue 1, 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.

Date: 2009
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Related works:
Working Paper: Repeated Games with Frequent Signals (2009)
Working Paper: Repeated Games with Frequent Signals (2007)
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