EconPapers    
Economics at your fingertips  
 

Cooperation dynamics in repeated games of adverse selection

Juan Escobar and Gastón Llanes

Journal of Economic Theory, 2018, vol. 176, issue C, 408-443

Abstract: We study cooperation dynamics in repeated games with Markovian private information. After any history, signaling reveals information that helps players coordinate their future actions, but also makes the problem of coordinating current actions harder. In equilibrium, players may play aggressive or uncooperative actions that signal private information and partners tolerate a certain number of such actions. We discuss several applications of our results: We explain the cycles of cooperation and conflict observed in trench warfare during World War I, show that price leadership and unilateral price cuts can be part of an optimal signaling equilibrium in a repeated Bertrand game with incomplete information, and show that communication between cartel members may be socially efficient in a repeated Cournot game. Finally, we show that the welfare losses disappear as the persistence of the process of types increases and the interest rate goes to zero.

Keywords: Repeated games; Private information; Signaling; Coordination; Collusion; Communication (search for similar items in EconPapers)
JEL-codes: D01 D21 C72 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053118301005
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Cooperation Dynamic in Repeated Games of Adverse Selection (2015) Downloads
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:eee:jetheo:v:176:y:2018:i:c:p:408-443

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-01-11
Handle: RePEc:eee:jetheo:v:176:y:2018:i:c:p:408-443