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Reputation in Repeated Moral Hazard Games

Author

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  • Atakan, Alp Enver
  • Ekmekci, Mehmet

Abstract

We study an infinitely repeated game where two players with equal discount factors play a simultaneous-move stage game. Player one monitors the stage- game actions of player two imperfectly, while player two monitors the pure stage- game actions of player one perfectly. Player one’s type is private information and he may be a “commitment type,” drawn from a countable set of commitment types, who is locked into playing a particular strategy. Under a full-support assumption on the monitoring structure, we prove a reputation result for repeated moral hazard games: if there is positive probability that player one is a particular type whose commitment payoff is equal to player one’s highest payoff, consistent with the players’ individual rationality, then a patient player one secures this type’s commitment payoff in any Bayes-Nash equilibrium of the repeated game.

Suggested Citation

  • Atakan, Alp Enver & Ekmekci, Mehmet, 2014. "Reputation in Repeated Moral Hazard Games," MPRA Paper 54427, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:54427
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    File URL: https://mpra.ub.uni-muenchen.de/54427/1/MPRA_paper_54427.pdf
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    References listed on IDEAS

    as
    1. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-1148, September.
    2. Atakan, Alp E. & Ekmekci, Mehmet, 2015. "Reputation in the long-run with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 157(C), pages 553-605.
    3. Cripps, Martin W. & Dekel, Eddie & Pesendorfer, Wolfgang, 2005. "Reputation with equal discounting in repeated games with strictly conflicting interests," Journal of Economic Theory, Elsevier, vol. 121(2), pages 259-272, April.
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    5. Drew Fudenberg & David K. Levine, 2008. "Reputation And Equilibrium Selection In Games With A Patient Player," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 7, pages 123-142, World Scientific Publishing Co. Pte. Ltd..
    6. Cripps, Martin W & Thomas, Jonathan P, 1995. "Reputation and Commitment in Two-Person Repeated Games without Discounting," Econometrica, Econometric Society, vol. 63(6), pages 1401-1419, November.
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    10. Olivier Gossner, 2011. "Simple bounds on the value of a reputation," PSE-Ecole d'économie de Paris (Postprint) halshs-00654683, HAL.
    11. Atakan, Alp E. & Ekmekci, Mehmet, 2013. "A two-sided reputation result with long-run players," Journal of Economic Theory, Elsevier, vol. 148(1), pages 376-392.
    12. Jimmy Chan, 2000. "On the Non-Existence of Reputation Effects in Two-Person Infinitely-Repeated Games," Economics Working Paper Archive 441, The Johns Hopkins University,Department of Economics.
    13. Alp E. Atakan & Mehmet Ekmekci, 2012. "Reputation in Long-Run Relationships," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 451-480.
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    15. Olivier Gossner, 2011. "Simple Bounds on the Value of a Reputation," Econometrica, Econometric Society, vol. 79(5), pages 1627-1641, September.
    16. Martin W. Cripps & Jonathan P. Thomas, 2003. "Some Asymptotic Results in Discounted Repeated Games of One-Sided Incomplete Information," Mathematics of Operations Research, INFORMS, vol. 28(3), pages 433-462, August.
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    Cited by:

    1. Atakan, Alp E. & Ekmekci, Mehmet, 2015. "Reputation in the long-run with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 157(C), pages 553-605.

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    More about this item

    Keywords

    Repeated Games; Reputation; Equal Discount Factor; Long-run Players; Imperfect Monitoring; Complicated Types; Finite Automaton;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D0 - Microeconomics - - General

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