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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