Dynamic stability in repeated games

Sergio Puente

No 618, Working Papers from Banco de España

Abstract: A concept of dynamic stability in infinitely repeated games with discounting is presented. For this purpose, one modification of the available theory is needed: we need to relax the assumption that the game starts in a given period. Under this new framework, we propose stable strategies such that a folk theorem with an additional stability requirement still holds. Under these strategies, convergence to the long run outcome is achieved in a finite number of periods, no matter what actions or deviations have been played in the past. Hence, we suggest a way in which a player can build up his reputation after a deviation.

Keywords: repeated games; stability; stable strategies (search for similar items in EconPapers)
JEL-codes: C70 C72 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2006-08
New Economics Papers: this item is included in nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0618

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