Informational Smallness and Private Monitoring in Repeated Games, Second Version

This paper uses a laboratory experiment to study the effect of the monitoring structure on the play of the infinitely repeated prisoner’s dilemma. Keeping the strategic form of the stage game fixed, we examine the behavior of subjects when information about past actions is perfect (perfect monitoring), noisy but public (public monitoring), and noisy and private (private monitoring). We find that the subjects sustain cooperation in every treatment, but that their strategies differ across the three treatments. Specifically, the strategies under imperfect monitoring are both more complex and more lenient than those under perfect monitoring. The results show how the changes in strategies across monitoring structures mitigate the effect of noise in monitoring on efficiency. (JEL C72, C73, C92, D82, D83)

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Repeated Multimarket Contact with Private Monitoring: A Belief-Free Approach

Proceedings of the AAAI Conference on Artificial Intelligence ◽

10.1609/aaai.v34i02.5576 ◽

2020 ◽

Vol 34 (02) ◽

pp. 2038-2045

Author(s):

Atsushi Iwasaki ◽

Tadashi Sekiguchi ◽

Shun Yamamoto ◽

Makoto Yokoo

Keyword(s):

Repeated Games ◽

Additional Condition ◽

Multimarket Contact ◽

Private Monitoring ◽

Game Theoretic ◽

Mild Punishment

This paper studies repeated games where two players play multiple duopolistic games simultaneously (multimarket contact). A key assumption is that each player receives a noisy and private signal about the other's actions (private monitoring or observation errors). There has been no game-theoretic support that multimarket contact facilitates collusion or not, in the sense that more collusive equilibria in terms of per-market profits exist than those under a benchmark case of one market. An equilibrium candidate under the benchmark case is belief-free strategies. We are the first to construct a non-trivial class of strategies that exhibits the effect of multimarket contact from the perspectives of simplicity and mild punishment. Strategies must be simple because firms in a cartel must coordinate each other with no communication. Punishment must be mild to an extent that it does not hurt even the minimum required profits in the cartel. We thus focus on two-state automaton strategies such that the players are cooperative in at least one market even when he or she punishes a traitor. Furthermore, we identify an additional condition (partial indifference), under which the collusive equilibrium yields the optimal payoff.

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