REPEATED GAMES WITH PROBABILISTIC HORIZON
Iván Arribas () and
Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)
Repeated games with probabilistic horizon are defined as those games where players have a common probability structure over the length of the game's repetition, T. In particular, for each t, they assign a probability pt to the event that "the game ends in period t". In this framework we analyze Generalized Prisoners' Dilemma games in both finite stage and differentiable stage games. Our construction shows that it is possible to reach cooperative equilibria under some conditions on the distribution of the discrete random variable T even if the expected length of the game is finite. More precisely, we completely characterize the existence of sub-game perfect cooperative equilibria in finite stage games by the (first order) convergence speed: the behavior in the limit of the ratio between the ending probabilities of two consecutive periods. Cooperation in differentiable stage games is determined by the second order convergence speed, which gives a finer analysis of the probability convergence process when the first convergence speed is zero.Leptokurtic distributions are defined as those distributions for which the (first order) convergence speed is zero and they preclude cooperation in finite stage games with probabilistic horizon. However, this negative result is obtained in differential stage games only for a subset of these distributions.
Keywords: repeated games; probabilistic horizon; cooperation (search for similar items in EconPapers)
Pages: 39 pages
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http://www.ivie.es/downloads/docs/wpasad/wpasad-2000-29.pdf Fisrt version / Primera version, 2000 (application/pdf)
Journal Article: Repeated games with probabilistic horizon (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2000-29
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