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Efficiency in Repeated Two-Action Games with Local Monitoring

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  • Francesco Nava
  • Michele Piccione

Abstract

The paper discusses community enforcement in infinitely repeated two-action games with local monitoring. Each player interacts with and observes only a fixed set of partners, of whom he is privately informed. The main result shows that for generic beliefs efficiency can be sustained in a sequential equilibrium in which strategies are independent of theplayers' beliefs about the monitoring structure. Stronger results are obtained when players are arbitrarily patient and payoffs are evaluated according to Banach-Mazur limits, and when players are impatient and only acyclic monitoring structures are allowed.

Suggested Citation

  • Francesco Nava & Michele Piccione, 2011. "Efficiency in Repeated Two-Action Games with Local Monitoring," STICERD - Theoretical Economics Paper Series 560, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stitep:560
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    File URL: https://sticerd.lse.ac.uk/dps/te/te560.pdf
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    References listed on IDEAS

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