CFDP 875

Information and Timing in Repeated Partnerships

Author(s): 

Publication Date: May 1988

Pages: 37

Abstract: 

In a repeated partnership game with imperfect monitoring, we distinguish among the effects of (1) shortening the period over which actions are held fixed, (2) increasing the frequency with which accumulated information is reported, and (3) reducing the amount of discounting of payoffs between successive periods. While reducing the amount of discounting generally improves incentives for cooperation, the other two changes can have the reverse effect. When the game is specified in the customary way with information reported at the end of each period of fixed action, the net effect of shortening the period length can be to destroy all incentives for cooperation, reversing the usual conclusion associated with the Folk Theorem for repeated games. Moreover, when interest rates are low, reducing the frequency of information reporting can greatly enhance the efficiency of equilibrium.

Keywords: 

Monitoring, Repeated games, Partnership, Incentives, Folk theorems

JEL Classification Codes: 026

Note: 

Published in Econometrica (November 1991), 59(6): 1713-1733 [DOI]