Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
985551 | Review of Economic Dynamics | 2010 | 20 Pages |
Abstract
This paper studies the global dynamics of a class of infinitely repeated two-player games in which the action space of each player is an interval, and the one-shot payoff of each player is additively separable in actions. We define an immediately reactive equilibrium (IRE) as a pure-strategy subgame perfect equilibrium such that each player's action is a stationary function of the opponent's last action. We completely characterize IREs and their dynamics in terms of certain indifference curves. Our results are used to show that in a prisoners' dilemma game with mixed strategies, gradual cooperation occurs when the players are sufficiently patient, and that in a certain duopoly game, kinked demand curves emerge naturally.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Takashi Kamihigashi, Taiji Furusawa,