Repeated games with endogenous choice of information mechanisms

Janos Flesch*, Andrés Perea y Monsuwé

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We consider two-player repeated games with nonobservable actions (cf. Lehrer 1989). An information mechanism for a player is a function which assigns a private signal to every action-pair of the one-shot game. In this paper, we extend the model to a situation in which both players can buy an information mechanism before playing the repeated game. Within this model, we provide a characterization of the lower equilibrium payoffs in terms of the one-shot game for the case that both players choose a nontrivial information mechanism with probability one. Moreover, we construct a lower equilibrium in a repeated game in which one of the players strictly randomizes between information mechanisms. It is shown that the corresponding payoffs cannot be induced by a lower equilibrium in which players choose a particular information mechanism with probability one.
Original languageEnglish
Pages (from-to)785-794
Number of pages10
JournalMathematics of Operations Research
Volume24
Issue number4
DOIs
Publication statusPublished - 1999

JEL classifications

  • c73 - "Stochastic and Dynamic Games; Evolutionary Games; Repeated Games"

Keywords

  • repeated games
  • imperfect monitoring
  • lower equilibria

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