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 ()
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Lucy White: Finance Unit, Harvard Business School

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

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)
Pages: 14 pages
Date: 2004-10-14
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: When the Punishment Must Fit the Crime: Remarks on the Failure of Simple Penal Codes in Extensive-Form Games (2004)
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