monash_2201.pdf (2.04 MB)
Achieving Intertemporal Efficiency and Symmetry through Intratemporal Asymmetry: (Eventual) Turn Taking in a Class of Repeated Mixed-Interest Games
journal contributionposted on 2017-06-08, 07:14 authored by Lau, Sau-Him Paul, Mui, Vai-Lam
Turn taking is observed in many field and laboratory settings. We study when and how turn taking can be supported as an equilibrium outcome in a class of repeated games, where the stage game is a symmetric two-player mixed-interest game with asymmehic joint-payoff-maximizing outcomes that may or may not be Nash equilibria. We consider the "turn taking with independent randomizations" (TTIR) strategy that achieves the following three objectives: (a) helping the players get onto a joint-payoff-maximizing turn-taking path, (b) resolving the question of who gets to start with the good turn first, and (c) deterring defection. The TTIR strategy is simpler than those time-varying strategies considered in the Folk Theorem for repeated games. We determine conditions under which a symmetric TTIR subgame-perfect equilibrium exists and is unique. We also derive comparative static results, and study the welfare properties of the TTIR equilibrium.