Article ID Journal Published Year Pages File Type
5072836 Games and Economic Behavior 2009 23 Pages PDF
Abstract

We show that small switching costs can have surprisingly dramatic effects in infinitely repeated games if these costs are large relative to payoffs in a single period. This shows that the results in Lipman and Wang do have analogs in the case of infinitely repeated games [Lipman, B., Wang, R., 2000. Switching costs in frequently repeated games. J. Econ. Theory 93, August 2000, 149-190]. We also discuss whether the results here or those in Lipman-Wang imply a discontinuity in the equilibrium outcome correspondence with respect to small switching costs. We conclude that there is not a discontinuity with respect to switching costs but that the switching costs do create a discontinuity with respect to the length of a period.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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