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Folk theorems in repeated games with switching costs

Author

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  • Tsodikovich, Yevgeny
  • Venel, Xavier
  • Zseleva, Anna

Abstract

We study how switching costs affect the subgame perfect equilibria in repeated games. We show that (i) the Folk Theorem holds whenever the players are patient enough; (ii) the set of equilibrium payoffs is obtained by considering the payoffs of a simple one-shot auxiliary game; and (iii) the switching costs have a negative impact on a player in the infinitely undiscounted repeated game but can be beneficial for him in a finitely repeated game or in a discounted game.

Suggested Citation

  • Tsodikovich, Yevgeny & Venel, Xavier & Zseleva, Anna, 2024. "Folk theorems in repeated games with switching costs," Games and Economic Behavior, Elsevier, vol. 146(C), pages 137-159.
    • Handle: RePEc:eee:gamebe:v:146:y:2024:i:c:p:137-159
    DOI: 10.1016/j.geb.2024.05.006
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    More about this item

    Keywords

    Switching costs; Repeated games; Folk theorem; Stochastic games; Non-zero-sum games;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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