When the Punishment Must Fit the Crime: Remarks on the Failure of Simple Penal Codes in Extensive-Form Games

George Mailath, Volker Nocke and Lucy White

No 4793, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In repeated normal-form games, simple penal codes (Abreu 1986, 1988) permit an elegant characterization of the set of subgame-perfect outcomes. We show that the logic of simple penal codes fails in repeated extensive-form games. We provide two examples illustrating that a subgame-perfect outcome may be supported only by a profile with the property that the continuation play after a deviation is tailored not only to the identity of the deviator, but also to the nature of the deviation.

Keywords: Simple penal code; Subgame perfect equilibrium; Repeated extensive game; Optimal punishment (search for similar items in EconPapers)
JEL-codes: C70 C72 C73 (search for similar items in EconPapers)
Date: 2004-12
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (5)

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