Open AccessRepeated games with incomplete information and discounting
Author(s) -
Pęski Marcin
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/te1390
Subject(s) - discounting , mathematical economics , complete information , stochastic game , bayesian game , set (abstract data type) , markov perfect equilibrium , repeated game , nash equilibrium , sequential equilibrium , economics , class (philosophy) , equilibrium selection , computer science , game theory , finance , artificial intelligence , programming language
We analyze discounted repeated games with incomplete information, such that the players' payoffs depend only on their own type ( known‐own payoff case ). We describe an algorithm for finding all equilibrium payoffs in games for which there exists an open set of belief‐free equilibria of Hörner and Lovo (2009). This includes generic games with one‐sided incomplete information and a large and important class of games with multisided incomplete information. When players become sufficiently patient, all Bayesian Nash equilibrium payoffs can be approximated by payoffs in sequential equilibria in which information is revealed finitely many times. The set of equilibrium payoffs is typically larger than the set of equilibrium payoffs in repeated games without discounting and is larger than the set of payoffs obtained in belief‐free equilibria. The results are illustrated in bargaining and oligopoly examples.