Open AccessEfficiency in repeated games with local interaction and uncertain local monitoring
Author(s) -
Nava Francesco,
Piccione Michele
Publication year - 2014
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te1200
Subject(s) - robustness (evolution) , enforcement , repeated game , mathematical economics , set (abstract data type) , computer science , microeconomics , action (physics) , unit (ring theory) , economics , game theory , mathematics , biochemistry , chemistry , programming language , physics , mathematics education , quantum mechanics , political science , law , gene
This paper discusses community enforcement in infinitely repeated, two‐action games with local interaction and uncertain monitoring. Each player interacts with and observes only a fixed set of opponents, of whom he is privately informed. The main result shows that when beliefs about the monitoring structure have full support, efficiency can be sustained with sequential equilibria that are independent of the players' beliefs. Stronger results are obtained when only acyclic monitoring structures are allowed or players have unit discount rates. These equilibria satisfy numerous robustness properties.