Abstract
We study how switching costs affect the subgame perfect equilibria in repeated games. We show that (i) the Folk Theorem holds whenever the players are patient enough; (ii) the set of equilibrium payoffs is obtained by considering the payoffs of a simple one-shot auxiliary game; and (iii) the switching costs have a negative impact on a player in the infinitely undiscounted repeated game but can be beneficial for him in a finitely repeated game or in a discounted game.
Original language | English |
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Pages (from-to) | 137-159 |
Number of pages | 23 |
Journal | Games and Economic Behavior |
Volume | 146 |
DOIs | |
Publication status | Published - 1 Jul 2024 |
JEL classifications
- c73 - "Stochastic and Dynamic Games; Evolutionary Games; Repeated Games"
Keywords
- Folk theorem
- Non-zero-sum games
- Repeated games
- Stochastic games
- Switching costs