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Reputation in Perturbed Repeated Games

By Klaus M. Schmidt and Jonathan P. Thomas


Abstract: The paper analyzes reputation effects in general perturbed repeated games with discounting. If there is some positive prior probability that one of the players is committed to play the same (pure or mixed) action in every period, then this provides a lower bound for her equilibrium payoff in all Nash equilibria. This bound is tight and independent of what other types have positive probability. It is generally lower than Fudenberg and Levine’s (1989, 1992) bound for games with a long-run player facing a sequence of short-run opponents. The bound cannot be improved by considering types playing history dependent commitment strategies

Topics: Reputation, Folk Theorem, repeated games, incomplete information
Year: 1996
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