Open AccessCommunication and cooperation in repeated games
Author(s) -
Awaya Yu,
Krishna Vijay
Publication year - 2019
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/te3049
Subject(s) - mathematical economics , repeated game , set (abstract data type) , nash equilibrium , folk theorem , discounting , computer science , quality (philosophy) , value (mathematics) , microeconomics , game theory , equilibrium selection , economics , philosophy , finance , epistemology , machine learning , programming language
We study the role of communication in repeated games with private monitoring. We first show that without communication, the set of Nash equilibrium payoffs in such games is a subset of the set of ε ‐coarse correlated equilibrium payoffs ( ε ‐CCE) of the underlying one‐shot game. The value of ε depends on the discount factor and the quality of monitoring. We then identify conditions under which there are equilibria with “cheap talk” that result in nearly efficient payoffs outside the set ε ‐CCE. Thus, in our model, communication is necessary for cooperation.