Efficiency and Observability with Long-Run and Short-Run Players

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Efficiency and Observability with Long-Run and Short-Run Players

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Title: Efficiency and Observability with Long-Run and Short-Run Players
Author: Levine, David; Fudenberg, Drew

Note: Order does not necessarily reflect citation order of authors.

Citation: Fudenberg, Drew and David K. Levine. 1994. Efficiency and observability with long-run and short-run players. Journal of Economic Theory 62, no. 1: 103-135.
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Abstract: We present a general algorithm for computing the limit, as δ → 1, of the set of payoffs of perfect public equilibria of repeated games with long-run and short-run players, allowing for the possibility that the players′ actions are not observable by their opponents. We illustrate the algorithm with two economic examples. In a simple partnership we show how to compute the equilibrium payoffs when the folk theorem fails. In an investment game, we show that two competing capitalists subject to moral hazard may both become worse off if their firms are merged and they split the profits from the merger. Finally, we show that with short-run players each long-run player′s highest equilibrium payoff is generally greater when their realized actions are observed.
Published Version: http://dx.doi.org/10.1006/jeth.1994.1006
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3203774
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