Continuous Time Limits of Repeated Games with Imperfect Public Monitoring

Review of Economic Dynamics, 2007, vol. 10, issue 2, 173-192

Abstract: In a repeated game with imperfect public information, the set of equilibria depends on the way that the distribution of public signals varies with the players' actions. Recent research has focused on the case of "frequent monitoring," where the time interval between periods becomes small. Here we study a simple example of a commitment game with a long-run and short-run player in order to examine different specifications of how the signal distribution depends upon period length. We give a simple criterion for the existence of efficient equilibrium, and show that the efficiency of the equilibria that can be supported depends in an important way on the effect of the player's actions on the variance of the signals, and whether extreme values of the signals are "bad news" of "cheating" behavior, or "good news" of "cooperative" behavior. (Copyright: Elsevier)

Keywords: Repeated games; Imperfect monitoring; Diffusion process; Folk theorem; Repeated moral hazard; Continuous-time limit (search for similar items in EconPapers)
JEL-codes: C02 C72 C73 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Related works:
Chapter: Continuous time limits of repeated games with imperfect public monitoring (2008)
Working Paper: Continuous Time Limits of Repeated Games with Imperfect Public Monitoring (2007)
Working Paper: Continuous Time Limits of Repeated Games with Imperfect Public Monitoring (2007)
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DOI: 10.1016/j.red.2007.02.002

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