Econometrica: Nov, 1991, Volume 59, Issue 6

Information and Timing in Repeated Partnerships

https://doi.org/0012-9682(199111)59:6<1713:IATIRP>2.0.CO;2-8
p. 1713-1733

David Pearce, Dilip Abreu, Paul Milgrom

In a repeated partnership game with imperfect monitoring, we distinguish among the effects of (1) reducing the interest rate, (2) shortening the period over which actions are held fixed, and (3) shortening the lag with which accumulated information is reported. All three changes are equivalent in games with perfect monitoring. With imperfect monitoring, reducing the interest rate always increases the possibilities for cooperation, but the other two changes always have the reverse effect when the interest rate is small.