"Mixed Strategy Equilibria in Repeated Games with One-Period Memory"
©
International Journal of Economic Theory,
March
2010
Volume: 6
|
Issue: 1
|
Pages: 167-187
Publication type: Journal article
Research Archive Topic: Business Economics and Public Policy, Corporate Finance
Abstract
Infinitely repeated games is the pre-dominant paradigm within which economists study long-term strategic interaction. The standard framework allows players to condition their strategies on all past actions; that is, assumes that they have unbounded memory. That is clearly a convenient simplification that is at odds with reality. In this paper we restrict attention to one-period memory and characterize all totally mixed equilibria. In particular, we focus on strongly mixed equilibria. We provide conditions that are necessary and sufficient for a game to have such an equilibrium. We further demonstrate the exact set of payoffs that can be generated by such equilibria.
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