This paper studies contagious equilibrium in infinitely repeated matching games. The innovation is to identify a key statistic of contagious punishment that, used together with a recursive formulation, generates tractable closed-form expressions for continuation payoffs, off equilibrium. This allows a transparent characterization of the dynamic incentives created by contagious punishment schemes.
A tractable analysis of contagious equilibria / Camera, Gabriele; Gioffre', Alessandro. - In: JOURNAL OF MATHEMATICAL ECONOMICS. - ISSN 0304-4068. - ELETTRONICO. - 50:(2014), pp. 290-300. [10.1016/j.jmateco.2013.07.003]
A tractable analysis of contagious equilibria
Gioffre', Alessandro
2014
Abstract
This paper studies contagious equilibrium in infinitely repeated matching games. The innovation is to identify a key statistic of contagious punishment that, used together with a recursive formulation, generates tractable closed-form expressions for continuation payoffs, off equilibrium. This allows a transparent characterization of the dynamic incentives created by contagious punishment schemes.
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