Efficiency in Repeated Games Revisited: The Role of Private Strategies
Michihiro Kandori, Ichiro Obara
Econometrica · 2006 · Volume 74 · Issue 2
DOI: 10.1111/j.1468-0262.2006.00669.x
Abstract
Most theoretical or applied research on repeated games with imperfect monitoring has focused onpublic strategies: strategies that depend solely on the history of publicly observable signals. This paper sheds light on the role ofprivate strategies: strategies that depend not only on public signals, but also on players' own actions in the past. Our main finding is that players can sometimes make better use of information by using private strategies and thatefficiency in repeated games can be improved. Our equilibrium private strategy for repeated prisoners' dilemma games consists of two states and has the property that each player's optimal strategy is independent of the other player's state.
Keywords
Efficiency, imperfect public monitoring, mixed strategy, partnership game, private equilibrium, private strategy, repeated game, two-state machine
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