Efficiency in Repeated Games Revisited: The Role of Private Strategies

Michihiro Kandori and Ichiro Obara

No CIRJE-F-255, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: Most theoretical or applied research on repeated games with imperfect monitoring has restricted attention to public strategies; strategies that only depend on history of publicly observable signals, and perfect public equilibrium (PPE); sequential equilibrium in public strategies. The present paper sheds light on the role of private strategies; strategies that depend on players' own actions in the past as well as observed public signals. Our main finding is that players can sometimes make better use of information by using private strategies and efficiency in repeated games can often be drastically improved. We illustrate this for both games with a small signal space (Anti-folk theorem example) and games with a large signal space, for which the Folk Theorem holds. Our private strategy can be regarded as a machine which consists of two states. We provide two di erent characterizations of our two-state machine equilibrium for general two-person repeated games with imperfect public monitoring.

Pages: 45 pages
Date: 2003-12
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Efficiency in Repeated Games Revisited: The Role of Private Strategies (2006)
Working Paper: Efficiency in Repeated Games Revisited: The Role of Private Strategies (2004)
Working Paper: Efficiency in Repeated Games Revisited: The Role of Private Strategies* (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2003cf255

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