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Reputation in the long-run with imperfect monitoring

Alp Atakan and Mehmet Ekmekci ()

Journal of Economic Theory, 2015, vol. 157, issue C, 553-605

Abstract: We study an infinitely repeated game where two players with equal discount factors play a simultaneous-move stage game. Player one monitors the stage-game actions of player two imperfectly, while player two monitors the pure stage-game actions of player one perfectly. Player one's type is private information and he may be a “commitment type,” drawn from a countable set of commitment types, who is locked into playing a particular strategy. Under a full-support assumption on the monitoring structure, we prove a reputation result for stage games with a strong Stackelberg action: if there is positive probability that player one is a particular type whose commitment payoff is equal to player one's highest payoff, consistent with the players' individual rationality, then a patient player one secures this type's commitment payoff in any Bayes–Nash equilibrium of the repeated game. In contrast, if the type's commitment payoff is strictly less than player one's highest payoff consistent with the players' individual rationality, then the worst perfect Bayesian equilibrium payoff for a patient player one is equal to his minimax payoff.

Keywords: Repeated games; Reputation; Equal discount factor; Long-run players; Imperfect monitoring; Finite automaton (search for similar items in EconPapers)
JEL-codes: C73 D83 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:157:y:2015:i:c:p:553-605

DOI: 10.1016/j.jet.2015.01.012

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