Journal Article

Beliefs and Private Monitoring

Christopher Phelan and Andrzej Skrzypacz

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 79, issue 4, pages 1637-1660
Published in print October 2012 | ISSN: 0034-6527
Published online January 2012 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rds009
Beliefs and Private Monitoring

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  • Game Theory and Bargaining Theory
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This paper develops new recursive, set based methods for studying repeated games with private monitoring. For any finite-state strategy profile, we find necessary and sufficient conditions for whether there exists a distribution over initial states such that the strategy, together with this distribution, form a correlated sequential equilibrium (CSE). Also, for any given correlation device for determining initial states (including degenerate cases where players' initial states are common knowledge), we provide necessary and sufficient conditions for the correlation device and strategy to be a CSE, or in the case of a degenerate correlation device, for the strategy to be a sequential equilibrium. We also consider several applications. In these, we show that the methods are computationally feasible, and how to construct and verify equilibria in a secret price-setting game.

Keywords: Repeated games; Private monitoring; C72; C73; D82

Journal Article.  12310 words.  Illustrated.

Subjects: Game Theory and Bargaining Theory ; Information, Knowledge, and Uncertainy

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