FOLK THEOREMS FOR INFINITELY REPEATED GAMES PLAYED BY ORGANIZATIONS WITH SHORT-LIVED MEMBERS*

doi:10.1111/j.1468-2354.2007.00436.x

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Wiley InterScience

International Economic Review

Volume 48 Issue 2, Pages 517 - 549

Published Online: 6 Apr 2007

Published on behalf of the University of Pennsylvania and Osaka University

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FOLK THEOREMS FOR INFINITELY REPEATED GAMES PLAYED BY ORGANIZATIONS WITH SHORT-LIVED MEMBERS*

Hajime Kobayashi †¹

†Osaka Prefecture University, Japan

*Manuscript received July 2003; revised March 2006.

¹ I am very grateful to Hideo Suehiro for his valuable comments and helpful discussions. I am also grateful to Hisao Hisamoto, Michihiro Kandori, Toshiji Kawagoe, Yasuyuki Miyahara, Akira Okada, Tadashi Sekiguchi, Takashi Ui, and participants at the seminar "Summer in Tsukuba." Special thanks are due to the editor and anonymous referees, whose comments improved the article. All existing errors are mine. Please address correspondence to: Hajime Kobayashi, College of Economics, Osaka Prefecture University, 1-1 Gakuen-Cho, Sakai, Osaka, Japan. E-mail: khajime@eco.osakafu-u.ac.jp.

ABSTRACT

We consider infinitely repeated games played by organizations with short-lived members. Each member enters the organization with no prior memory. He plays the role of taking actions for stage games in the first half of his lifetime. In the beginning of the second half, when a new member enters the organization, the existing member privately sends a message to the new member. He remains in the organization for the second half, and then retires from the game. We prove that folk theorems hold in this environment; that is, organizations essentially implement Fudenberg and Maskin strategies.

Received: 2003; First Revision: 2006;

DIGITAL OBJECT IDENTIFIER (DOI)

10.1111/j.1468-2354.2007.00436.x About DOI