Theory seminar presented by S. Nageeb Ali (Penn State)

Abstract: We develop a theory of repeated interaction for coalitional behavior. We consider stage games where both individuals and coalitions may deviate. However, coalition members cannot commit to long-run behavior (on and off the path), and anticipate that today’s actions influence tomorrow’s behavior. We evaluate the degree to which history dependence can ward off coalitional deviations. If monitoring is perfect, every feasible and strictly individually rational payoff can be supported by history dependent conventions. By contrast, if players can make secret side payments to each other, every coalition achieves a coalitional minmax value, reducing the set of supportable payoffs to the core of the stage game.

Paper available