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Instability of Belief-free Equilibria

Yuval Heller ()

No 2017-01, Working Papers from Bar-Ilan University, Department of Economics

Abstract: Various papers have presented folk theorem results for repeated games with private monitoring that rely on belief-free equilibria. I show that these equilibria are not robust against small perturbations in the behavior of potential opponents. Specifically, I show that essentially none of the belief-free equilibria is evolutionarily stable, and that in generic games none of these equilibria is neutrally stable. Moreover, in a large family of games (which includes many public good games), the belief-free equilibria fail to satisfy even a very mild stability refinement.

Keywords: Belief-free equilibrium; evolutionary stability; private monitoring; repeated Prisoner’s Dilemma; communication (search for similar items in EconPapers)
JEL-codes: C73 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth and nep-mic
Date: 2017-01
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