The Folk Theorem in Repeated Games with Discounting or with Incomplete Information.

Fudenberg, D., & Maskin, E. (1986). The Folk Theorem in Repeated Games with Discounting or with Incomplete Information. Econometrica, 54(3), 533-554.

Type

Journal article

Intellectual base

Primary research

Year

1986

DOI

10.2307/1911307

Link

https://doi.org/10.2307/1911307

Cited from

economics_finance, information_theory

Cited by

3 citations across 3 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Other-Regarding Preferences
  • It specialises preference rather than restating it. Not cooperation. Cooperation is a behavioural pattern that can arise without other-regarding preferences (repeated-game folk theorem, pure self-interest under the shadow of the future) and that other-regarding preferences can fail to produce (envious or spiteful agents defect).

    This sourceShows any individually rational payoff can be sustained in perfect equilibrium of the repeated game among sufficiently patient self-interested players — cooperation without other-regarding preferences.

• Shadow Of The Future
  • This is the horizon×observability lever made literal: raise \(\delta\) (longer expected horizon) past the threshold and cooperation becomes a self-interested equilibrium; drop it below and cooperation collapses to one-shot defection — and the folk theorem generalizes this, proving that for sufficiently patient players essentially any individually-rational payoff, cooperation included, is sustainable as an equilibrium.
• Social Dilemma
  • It supports reasoning about how cooperation can nonetheless be sustained — through iteration and reputation, formalized in the folk theorem and instantiated in strategies like tit-for-tat, which show that the shadow of the future can make cooperation a rational equilibrium of the repeated game even though it is irrational in any single round.

    This sourceEstablishes the folk theorem: with sufficiently patient players, cooperation can be sustained as a subgame-perfect equilibrium of the repeated game even though defection is the unique one-shot equilibrium, formalizing the shadow-of-the-future logic behind tit-for-tat.

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