An Algorithm for Two Player Repeated Games with Perfect Monitoring

Dilip Abreu and Yuliy Sannikov
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Dilip Abreu: Princeton University
Yuliy Sannikov: Princeton University

No 1360, Working Papers from Princeton University, Department of Economics, Econometric Research Program.

Abstract: Consider repeated two-player games with perfect information and discounting. We provide an algorithm that computes the set of payoff pairs V ? of all pure strategy subgame perfect equilibria with public randomization. The algorithm provides significant efficiency gains over the existing implementations of the algorithm from Abreu, Pearce and Stacchetti (1990). These efficiency gains arise from a better understanding of the manner in which extreme points of the equilibrium payoff set are generated. An important theoretical implication of our algorithm is that the set of extreme points E of V ? is finite. Indeed, |E| ? 3|A|, where A is the set of action profiles of the stage game.

JEL-codes: C01 C70 (search for similar items in EconPapers)
Date: 2011-10
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