Efficiency in repeated two-action games with local monitoring

Francesco Nava and Michele Piccione

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The paper discusses community enforcement in infinitely repeated two-action games with local monitoring. Each player interacts with and observes only a fixed set of partners, of whom he is privately informed. The main result shows that for generic beliefs efficiency can be sustained in a sequential equilibrium in which strategies are independent of the players’ beliefs about the monitoring structure. Stronger results are obtained when players are arbitrarily patient and payoffs are evaluated according to Banach-Mazur limits, and when players are impatient and only acyclic monitoring structures are allowed.

JEL-codes: J1 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2011-09
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