Theoretical Economics 11 (2016), 53–87
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Approximate efficiency in repeated games with side-payments and correlated signals
Jimmy Chan, Wenzhang Zhang
Abstract
Side-payments are common in many long-term relationships. We show that when players can exchange side-payments, approximate efficiency is achievable in any repeated game with private monitoring and communication, so long as the players can observe their own payoffs and are sufficiently patient, the efficient stage-game outcome is unique, and the signal distribution has full support. Unlike existing results in the literature, our result does not require deviations be statistically detectable.
Keywords: Repeated games, private monitoring, communication
JEL classification: C73
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