Theoretical Economics 14 (2019), 513–553
Communication and cooperation in repeated games
Yu Awaya, Vijay Krishna
We study the role of communication in repeated games with private monitoring. We first show that without communication, the set of Nash equilibrium payoffs in such games is a subset of the set of Îµ-coarse correlated equilibrium payoffs (Îµ-CCE) of the underlying one-shot game. The value of Îµ depends on the discount factor and the quality of monitoring. We then identify conditions under which there are equilibria with "cheap talk" that result in nearly efficient payoffs outside the set Îµ-CCE. Thus, in our model, communication is necessary for cooperation.
Keywords: Repeated games, private monitoring, communication
JEL classification: C73
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