Information and Timing in Repeated Partnerships

Abreu, Dilip; Milgrom, Paul; Pearce, David

doi:10.2307/2938286

Cited by 238 publications

(202 citation statements)

References 16 publications

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“…Our results are related to the findings of Abreu, Milgrom, and Pearce (1991), who study a continuously repeated prisoner's dilemma with imperfect monitoring. In that model, lengthening the period over which actions are held fixed increases the possibilities for cooperation, expanding the set of feasible equilibrium payoffs.…”

Section: Introductionsupporting

confidence: 58%

“…Similarly, in a model of commodity money with infrequent search, the fact that strategies are held fixed for an entire period is a key feature that drives the large multiplicity of equilibria. While the game studied by Abreu, Milgrom, and Pearce (1991) is purely a game of coordination, the Kiyotaki and Wright (1989) model is an anonymous sequential game (see Jovanovic and Rosenthal (1988)) in which strategic concerns play no role.…”

Section: Introductionmentioning

confidence: 99%

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Commodity money with frequent search

Oberfield

Trachter

2012

Journal of Economic Theory

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Kiyotaki and Wright (1989) model of commodity money is the multiplicity of dynamic equilibria. We show that the frequency of search is strongly related to the extent of multiplicity. To isolate the role of frequency of search in generating multiplicity, we (i) vary the frequency of search without changing the frequency of finding a trading partner and (ii) focus on symmetric dynamic equilibria, a class for which we can sharply characterize several features of the set of equilibria. For any finite frequency of search this class retains much of the multiplicity. For each frequency we characterize the full set of equilibrium payoffs, strategies played, and dynamic paths of the state variables. Indexed by any of these features, the set of equilibria converges uniformly to a unique equilibrium in the continuous search limit. We conclude that when search is frequent, the seemingly exotic dynamics are irrelevant. Terms of use: Documents in EconStor may

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Section: Introductionsupporting

confidence: 58%

Section: Introductionmentioning

confidence: 99%

Commodity money with frequent search

Oberfield

Trachter

2012

Journal of Economic Theory

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“…The second condition (2) is useful here to exclude this possibility: such learning does not occur in equilibrium. Then it turns out that the binding constraint is with respect to the one-period deviation in the first period as in Abreu, Milgrom and Pearce [1]. Note that the deviation gain from such one-period deviation is in the order of 1 T compared to the total payoff of the T-period game.…”

Section: Proof First Note Thatmentioning

confidence: 99%

“…However, conditional independence is a nongeneric assumption. 1 Furthermore, it is difficult to introduce even a slight correlation of private signals. This is because T must go to infinity to obtain the exact folk theorem, hence players may be able to obtain a large amount of information from their accumulated private signals even if each signal has a limited information.…”

Section: Introductionmentioning

confidence: 99%

Folk theorem with communication

Obara

2009

Journal of Economic Theory

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1 I am grateful to the associate editor, an anonymous referee, Galit Ashkenazi-Golan, Michihiro Kandori, and George Mailath for their helpful comments. I also thank the seminar participants at 2005 SAET conference at Vigo and University of Southern California. AbstractThis paper proves a new folk theorem for repeated games with private monitoring and communication, extending the idea of delayed communication in Compte [6] to the case where private signals are correlated.The sufficient condition for the folk theorem is generically satisfied with more than two players, even when other well-known conditions are not. The folk theorem also applies to some two-players repeated games.

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“…One might argue that the firms cannot credibly refuse to transact; in the event of termination, they would renegotiate the relational contract to generate some ongoing profit. The economics literature on repeated games with imperfect monitoring is subject to the same criticism that in a punishment phase, the players have an incentive to renegotiate to a more favorable continuation equilibrium; see, for example, Abreu et al (1986Abreu et al ( , 1991. Laboratory experiments in a repeated trust game conducted by Schweitzer et al (2005) suggest that the degree to which cooperation can be restored following a breakdown in the relationship depends on whether the breakdown is accompanied by deliberate, visible deception.…”

Section: Derivation Of An Optimal Relational Contractmentioning

confidence: 99%

Partnership in a Dynamic Production System with Unobservable Actions and Noncontractible Output

Plambeck

Taylor

2006

Management Science

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T his paper considers two firms that engage in joint production. The prospect of repeated interaction introduces dynamics, in that actions that firms take today influence the costliness and effectiveness of actions in the future. Repeated interaction also facilitates the use of informal agreements (relational contracts) that are sustained not by the court system, but by the ongoing value of the relationship. We characterize the optimal relational contract in this dynamic system with double moral hazard. We show that an optimal relational contract has a simple form that does not depend on the past history. The optimal relational contract may require that the firms terminate their relationship with positive probability following poor performance. We show how process visibility, which allows the firms to better assess who is at fault, can substantially improve system performance. The degree to which process visibility eliminates the need for termination depends on the nature of the dynamics: If the buyer's action does not influence the dynamics, the need for termination is eliminated; otherwise, termination may be required.

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Information and Timing in Repeated Partnerships

Cited by 238 publications

References 16 publications

Commodity money with frequent search

Commodity money with frequent search

Folk theorem with communication

Partnership in a Dynamic Production System with Unobservable Actions and Noncontractible Output

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