Monitoring versus Discounting in Repeated Games

Takuo Sugaya and Alexander Wolitzky

Econometrica, 2023, vol. 91, issue 5, 1727-1761

Abstract: We study how discounting and monitoring jointly determine whether cooperation is possible in repeated games with imperfect (public or private) monitoring. Our main result provides a simple bound on the strength of players' incentives as a function of discounting, monitoring precision, and on‐path payoff variance. We show that the bound is tight in the low‐discounting/low‐monitoring double limit, by establishing a public‐monitoring folk theorem where the discount factor and the monitoring structure can vary simultaneously.

Date: 2023
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