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Efficient chip strategies in repeated games

Author

Listed:
  • Olszewski, Wojciech

    (Department of Economics, Northwestern University)

  • Safronov, Mikhail

    (Department of Economics, University of Cambridge)

Abstract

We study a class of chip strategies in repeated games of incomplete information. This class generalizes the strategies studied by Möbius (2001) in the context of a favor-exchange model and the strategies studied in our companion paper Olszewski and Safronov (2017). In two-player games, if players have private values and their types evolve according to independent Markov chains, then under very mild conditions on the stage game, the efficient outcome can be approximated by chip-strategy equilibria when the discount factor tends to 1. We extend this result (assuming stronger conditions) to stage games with any number of players. Chip strategies can be viewed as a positive model of repeated interactions, and the insights from our analysis seem applicable in similar contexts, not covered by the present analysis.

Suggested Citation

  • Olszewski, Wojciech & Safronov, Mikhail, 2018. "Efficient chip strategies in repeated games," Theoretical Economics, Econometric Society, vol. 13(3), September.
    • Handle: RePEc:the:publsh:2434
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    References listed on IDEAS

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    3. Atila Abdulkadiroglu & Kyle Bagwell, 2013. "Trust, Reciprocity, and Favors in Cooperative Relationships," American Economic Journal: Microeconomics, American Economic Association, vol. 5(2), pages 213-259, May.
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    5. Wolitzky, Alexander, 2015. "Communication with tokens in repeated games on networks," Theoretical Economics, Econometric Society, vol. 10(1), January.
    6. Christine Hauser & Hugo Hopenhayn, 2008. "Trading Favors: Optimal Exchange and Forgiveness," Carlo Alberto Notebooks 88, Collegio Carlo Alberto.
    7. Matthew O Jackson & Hugo F Sonnenschein, 2007. "Overcoming Incentive Constraints by Linking Decisions -super-1," Econometrica, Econometric Society, vol. 75(1), pages 241-257, January.
    8. Aoyagi, Masaki, 2003. "Bid rotation and collusion in repeated auctions," Journal of Economic Theory, Elsevier, vol. 112(1), pages 79-105, September.
    9. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
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    Cited by:

    1. Gregorio Curello & Ludvig Sinander, 2020. "Screening for breakthroughs," Papers 2011.10090, arXiv.org, revised Feb 2024.

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    More about this item

    Keywords

    Repeated games;

    JEL classification:

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

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