High frequency repeated games with costly monitoring

• 成果类型: Article
• 署名作者: Lehrer, Ehud; Solan, Eilon
• 署名单位: Tel Aviv University; INSEAD Business School
• 刊物名称: THEORETICAL ECONOMICS
• ISSN/ISSBN: 1555-7561
• DOI: 10.3982/TE2627
• 发表日期: 2018-01-01
• 页码: 87-113
• 关键词: High frequency repeated games; costly monitoring; Nash equilibrium; public perfect equilibrium; no folk theorem; characterization

摘要

We study two-player discounted repeated games in which one player cannot monitor the other unless he pays a fixed amount. It is well known that in such a model the folk theorem holds when the monitoring cost is on the order of magnitude of the stage payoff. We analyze high frequency games in which the monitoring cost is small but still significantly higher than the stage payoff. We characterize the limit set of public perfect equilibrium payoffs as the monitoring cost tends to 0. It turns out that this set is typically a strict subset of the set of feasible and individually rational payoffs. In particular, there might be efficient and individually rational payoffs that cannot be sustained in equilibrium. We also make an interesting connection between games with costly monitoring and games played between long-lived and short-lived players. Finally, we show that the limit set of public perfect equilibrium payoffs coincides with the limit set of Nash equilibrium payoffs. This implies that our characterization applies also to sequential equilibria.