On the Incredibility of Perfect Threats in Repeated Games: Note

Ernst Mohr

International Economic Review, 1988, vol. 29, issue 3, 551-55

Abstract: The deterrence equilibrium concept of an important class of repeated games is shown to suffer from an unsoluble rational ity versus credibility conflict. The implicit assumption made when de terrence solutions to repeated games are constructed is that perfectn ess is a suffi-cient condition for the credibility of threats. The va lidity of this assumption, however, hinges on the unsatisfactory cond ition that players must exhibit a different rationality at different stages of the game. Making rationality stationary implies that suffic ient conditions for the credibility of threats fail to exist. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1988
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