Abstract
Various papers have presented folk theorem results for repeated games with private monitoring that rely on belief-free equilibria. I show that these equilibria are not robust against small perturbations in the behavior of potential opponents. Specifically, I show that essentially none of the belief-free equilibria is evolutionarily stable, and that in generic games none of these equilibria is neutrally stable. Moreover, in a large family of games (which includes many public good games), the belief-free equilibria fail to satisfy even a very mild stability refinement.
| Original language | English |
|---|---|
| Pages (from-to) | 261-286 |
| Number of pages | 26 |
| Journal | Journal of Economic Theory |
| Volume | 168 |
| DOIs | |
| State | Published - 1 Mar 2017 |
Bibliographical note
Funding Information:A previous version of this manuscript was entitled “Instability of Equilibria with Private Monitoring.” I would like to express my deep gratitude to Mehmet Ekmekci, Peter Eso, Michihiro Kandori, Erik Mohlin, Thomas Norman, Ron Peretz, Satoru Takahashi, Jorgen Weibull, Yuichi Yamamoto, the associate editor, and the referees, for many helpful comments. I am grateful to the European Research Council for its financial support (starting grant #677057).
Publisher Copyright:
© 2017 Elsevier Inc.
Keywords
- Belief-free equilibrium
- Communication
- Evolutionary stability
- Private monitoring
- Repeated Prisoner's Dilemma