Matching, Repeated Game and Aspiration

Akihiko Matsui and Inkoo Cho
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Akihiko Matsui: University of Tokyo

No 75, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: In general symmetric games with a pure symmetric efficient state (Karadika, Mookherjee, Ray and Vega-Rodondo [1998]), the long term relationship becomes pervasive if the society has a large number of players and the probability of exogenous termination of long term relationship is small. At any point of time, almost all players are engaged in the long term relationship, playing the symmetric efficient outcome, which is a natural focal point (Schelling [1960]). Although the players are heterogeneous, the decision to continue the long term relationship is based on the identical criterion asymptotically: players choose to continue the long term relationship if and only if the payoff is not below the payoff from the pure symmetric efficient state. A uniform social norm arises through decentralized matching process in combination with the repeated interactions among heterogeneous players.

Date: 2008
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