Repeated Games with Asymptotically Finite Horizon and Imperfect Public Monitoring

Yves Guéron

Korean Economic Review, 2019, vol. 35, 109-123

Abstract: We consider a two-player infinitely repeated game with asymptotically finite horizons: discount factors converge to zero over time. The stage-game has a continuum of actions and a unique and interior Nash equilibrium. It is known that when players perfectly observe each other’s actions, cooperation can be achieved and equilibrium payoffs can be strictly higher than the stage-game equilibrium payoff. We show that introducing an arbitrarily small amount of smooth noise in the monitoring makes cooperation impossible and players play the static Nash equilibrium of the stage-game forever.

Keywords: Dynamic Games; Asymptotically Finite Horizon; Folk-theorem; Imperfect Monitoring (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Date: 2019
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