Monitoring versus Discounting in Repeated Games
Takuo Sugaya, Alexander Wolitzky
Econometrica · 2023 · Volume 91 · Issue 5
Abstract
We study how discounting and monitoring jointly determine whether cooperation is possible in repeated games with imperfect (public or private) monitoring. Our main result provides a simple bound on the strength of players' incentives as a function of discounting, monitoring precision, and on-path payoff variance. We show that the bound is tight in the low-discounting/low-monitoring double limit, by establishing a public-monitoring folk theorem where the discount factor and the monitoring structure can vary simultaneously.
Keywords
Repeated games, monitoring precision, blind game, occupation measure, χ2-divergence, variance decomposition, folk theorem, frequent actions
Enable JavaScript for citation tools and additional paper interactions.