Finite Memory and Imperfect Monitoring
Harold Linh Cole, Narayana Kocherlakota · 2001
In this paper, we consider a class of infinitely repeated games with imperfect public monitoring.We look at symmetric perfect public equilibria with memory K: equilibria in which strategies are restricted to depend only on the last K observations of public signals.Define Γ K to be the set of payoffs of equilibria with memory K.We show that for some parameter settings, Γ K = Γ ∞ for sufficiently large K.However, for other parameter settings, we show that not only is lim K→∞ Γ K 6 = Γ ∞ , but that Γ k is completely degenerate.Moreover, this last result is essentially independent of the discount factor.* We thank Stephen Morris, Steven Tadelis, and participants of the Yale Theory discussion group for comments and suggestions.The views expressed