Delayed-Response Strategies in Repeated Games with Observation Lags

Drew  Fudenberg; Yuhta  Ishii; Scott Duke Kominers

Article | Journal of Economic Theory

Delayed-Response Strategies in Repeated Games with Observation Lags

by Drew Fudenberg, Yuhta Ishii and Scott Duke Kominers

Abstract

We extend the folk theorem of repeated games to two settings in which players' information about others' play arrives with stochastic lags. In our first model, signals are almost-perfect if and when they do arrive, that is, each player either observes an almost-perfect signal of period-t play with some lag or else never sees a signal of period-t play. The second model has the same lag structure, but the information structure corresponds to a lagged form of imperfect public monitoring, and players are allowed to communicate via cheap-talk messages at the end of each period. In each case, we construct equilibria in “delayed-response strategies,” which ensure that players wait long enough to respond to signals that with high probability all relevant signals are received before players respond. To do so, we extend past work on private monitoring to obtain folk theorems despite the small residual amount of private information.

Keywords: ＂Repeated games＂; Folk theorem; Private monitoring; Observation lag; Game Theory;

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Fudenberg, Drew, Yuhta Ishii, and Scott Duke Kominers. "Delayed-Response Strategies in Repeated Games with Observation Lags." Journal of Economic Theory 150 (March 2014): 487–514.

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Delayed-Response Strategies in Repeated Games with Observation Lags

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