Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: May, 2004, Volume 72, Issue 3

Repeated Games with Private Monitoring: Two Players

https://doi.org/10.1111/j.1468-0262.2004.00513.x
p. 823-852

Hitoshi Matsushima

We investigate two‐player infinitely repeated games where the discount factor is less than but close to unity. Monitoring is private and players cannot communicate. We require no condition concerning the accuracy of players' monitoring technology. We show the folk theorem for the prisoners' dilemma with conditional independence. We also investigate more general games where players' private signals are correlated only through an unobservable macro shock. We show that efficiency is sustainable for generic private signal structures when the size of the set of private signals is sufficiently large. Finally, we show that cartel collusion is sustainable in price‐setting duopoly.


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