Folk theorems in repeated games with switching costs

Yevgeny Tsodikovich, Xavier Venel*, Anna Zseleva

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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 languageEnglish
Pages (from-to)137-159
Number of pages23
JournalGames and Economic Behavior
Volume146
DOIs
Publication statusPublished - 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

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