Toward a Theory of Discounted Repeated Games with Imperfect Monitoring

Dilip Abreu, David Pearce and Ennio Stacchetti

Econometrica, 1990, vol. 58, issue 5, 1041-63

Abstract: This paper investigates pure strategy sequential equilibria of repeated games with imperfect monitoring. The approach emphasizes the equilibrium value set and the static optimization problems embedded in extremal equilibria. A succession of propositions, central among which is "self-generation," allow properties of constrained efficient supergame equilibria to be deduced from the solutions of the static problems. The authors show that the latter include solutions having a "bang-bang" property; this affords a significant simplification of the equilibria that need be considered. These results apply to a broad class of asymmetric games, thereby generalizing their earlier work on optimal cartel equilibria. Copyright 1990 by The Econometric Society.

Date: 1990
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