Dynamic stability in repeated games

• Autores: Sergio Puente
• Localización: Documentos de trabajo - Banco de España, ISSN 0213-2710, Nº 18, 2006, págs. 5-26
• Idioma: inglés
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• Resumen

  • A concept of dynamic stability in infinitely repeated games with discounting is presented. For this purpose, one modification of the available theory is needed: we need to relax the assumption that the game starts in a given period. Under this new framework, we propose stable strategies such that a folk theorem with an additional stability requirement still holds. Under these strategies, convergence to the long run outcome is achieved in a finite number of periods, no matter what actions or deviations have been played in the past. Hence, we suggest a way in which a player can build up his reputation after a deviation.