Cooperation Dynamic in Repeated Games of Adverse Selection
Juan Escobar and
Gastón Llanes ()
No 311, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile
We study a class of repeated games with Markovian private information and characterize optimal equilibria as players become arbitrarily patient. We show that seemingly non-cooperative action may occur in equilibrium and serve as signals of changes in private information. Players forgive such actions, and use the information they convey to adjust their continuation play. However, to forgive is not to forget: players keep track of the number of aggressions and enter into a punishment phase if that number becomes suspiciously high. Our model explains features of long-run relationships that are only barely understood, such as equilibrium defaults, unilateral price cuts, collusive price leadership, graduated sanctions, and restitutions. We also explore a model in which interactions are frequent and show how increasing the persistence of the process of types reduces informational fictions. Key words: Keywords: Repeated games, adverse selection, signaling, tacit collusion, price leadership, price cuts, equilibrium defaults, graduated sanctions.
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://www.dii.uchile.cl/~cea/sitedev/cea/www/down ... E120150408163402.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found
Journal Article: Cooperation dynamics in repeated games of adverse selection (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:edj:ceauch:311
Access Statistics for this paper
More papers in Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile Contact information at EDIRC.
Bibliographic data for series maintained by ().