Consider repeated two-player games with perfect monitoring and discounting. We provide an algorithm that computes the set V* of payoff pairs of all pure-strategy subgame-perfect equilibria with public randomization. The algorithm provides significant efficiency gains over the existing implementations of the algorithm from Abreu et al. (1990). These efficiency gains arise from a better understanding of the manner in which extreme points of the equilibrium payoff set are generated. An important theoretical implication of our algorithm is that the set of extreme points E of V* is finite. Indeed, |E| 3|A|, where A is the set of action profiles of the stage game.
|Original language||English (US)|
|Number of pages||26|
|State||Published - May 2014|
All Science Journal Classification (ASJC) codes
- Economics, Econometrics and Finance(all)
- Perfect monitoring
- Repeated games