Frequent Monitoring in Repeated Games under Brownian Uncertainty

António Osório

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies frequent monitoring in a simple infinitely repeated game with imperfect public information and discounting, where players observe the state of a continuous time Brownian process at moments in time of length Δ. It shows that efficient strongly symmetric perfect public equilibrium payoffs can be achieved with imperfect public monitoring when players monitor each other at the highest frequency, i.e. Δ→0. The approach proposed places distinct initial conditions on the process, which depend on the unknown action profile simultaneously and privately decided by the players at the beginning of each period of the game. The strong decreasing effect on the expected immediate gains from deviation when the interval between actions shrinks, and the associated increase precision of the public signals, make the result possible in the limit. The existence of a positive monotonic relation between payoffs and monitoring intensity is also found.

Keywords: Repeated Games; Frequent Monitoring; Imperfect Public Monitoring; Brownian Motion; Moral Hazard (search for similar items in EconPapers)
JEL-codes: C72 C73 D82 (search for similar items in EconPapers)
Date: 2009-01-04
New Economics Papers: this item is included in nep-cta and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13104

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