SFB 303 Discussion Paper No. A - 333
Author: Schmidt, Klaus M.
Title: Reputation and Equilibrium Characterization in Repeated Games of
Conflicting Interests
Abstract: A two-person game has conflicting interests if the strategy to which
player one would most like to commit himself holds player two down to her
min-max payoff. Suppose there is a positive prior probability that player one
is a "commitment type" who will always play this strategy. Then player one
will get at least his commitment payoff in any Nash equilibrium of the
repeated game if his discount factor approaches one. This result is robust
against further perturbations of the informational structure and in striking
contrast to the message of the Folk theorem for games of incomplete
information.
Keywords: Commitment, Folk theorem, Repeated Games, Reputation
JEL-Classification-Number: 026
Creation-Date: March 1991
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