Communication in repeated games with costly monitoring |
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Authors: | Elchanan Ben-Porath Michael Kahneman |
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Institution: | a The Department of Economics and the Center for Rationality, the Hebrew University of Jerusalem, Feldman building, Givaat-Ram, Jerusalem, Israel;b The Eitan Berglas School of Economics, Tel-Aviv University, PO Box 39040, Ramat Aviv, 69978, Tel-Aviv, Israel |
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Abstract: | We study repeated games with discounting where perfect monitoring is possible, but costly. It is shown that if players can make public announcements, then every payoff vector which is an interior point in the set of feasible and individually rational payoffs can be implemented in a sequential equilibrium of the repeated game when the discount factor is high enough. Thus, efficiency can be approximated even when the cost of monitoring is high, provided that the discount factor is high enough. |
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Keywords: | Repeated games Costly monitoring Communication |
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