An algorithm for two-player repeated games with perfect monitoring

Dilip Abreu, Yuliy Sannikov

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

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 languageEnglish (US)
Pages (from-to)313-338
Number of pages26
JournalTheoretical Economics
Volume9
Issue number2
DOIs
StatePublished - May 2014

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

Keywords

  • Computation
  • Perfect monitoring
  • Repeated games

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