Gabriel Carroll: Dynamic Incentives in Incompletely Specified Environments
Consider a repeated interaction where it is unknown which of various stage games will be played each period. This framework captures the logic of intertemporal incentives even though numeric payoffs to any strategy profile are indeterminate. A natural solution concept is ex post perfect equilibrium (XPE): strategies must form a subgame-perfect equilibrium for any realization of the sequence of stage games. When (i) there is one long-run player and others are short-run, and (ii) public randomization is available, we can adapt the standard recursive approach to determine the maximum sustainable gap between reward and punishment. This leads to an explicit characterization of what outcomes are supportable in equilibrium, and an optimal penal code that supports them. Any non-XPE-supportable outcome fails to be an SPE outcome for some (possibly ambiguous) specification of the stage games. Unlike in standard repeated games, restrictions (i) and (ii) are crucial.
Date: 12 November 2021, 15:15 (Friday, 5th week, Michaelmas 2021)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room A or Join online https://zoom.us/j/91802954429?pwd=ZzNyeEcvL3JjN2NPVWZHVG9hcmR1UT09
Speaker: Gabriel Carroll (University of Toronto)
Organising department: Department of Economics
Part of: Nuffield Economic Theory Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Emma Heritage