Perturbed finitely repeated games
Mathematical Social Sciences, 2019, vol. 98, issue C, 39-46
This paper explores the robustness of predictions made in long but finitely repeated games. The robustness approach used in this paper is related to the idea that a modeler may not have absolute faith in his model: The payoff matrix may not remain the same at all dates and may vary temporarily from time to time with an arbitrarily small probability. Therefore, he may require not rejecting an outcome if it is an equilibrium in some game arbitrarily close to the original one. It is shown that the set of feasible and rational payoffs is the (essentially) unique robust equilibrium payoff set when the horizon is sufficiently large. Consequently, cooperation can arise as an equilibrium behavior in a game arbitrarily close to the standard prisoner’s dilemma if the horizon is finite but sufficiently long.
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:98:y:2019:i:c:p:39-46
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