Self-Evident Events and the Value of Linking

2017-03-15

Speaker£ºDr ZHANG Wenzhang (Shanghai University of Finance and Economics )

Time£º15:30-17:00 March 23,2017(Thursday)

Site£ºB251

Abstract£ºWe propose a theory of linking in long-term relationships that is based on the notion of self-evident event, which describes what becomes "public" at the end of a stage game where players observe both public and private information. We obtain a tight bound on the average per-period efficiency loss that must be incurred to enforce a stage-game outcome throughout a T-period repeated game when T is large. Our results apply to all monitoring structures and strategy profiles. They explain the inefficiency result in Abreu, Milgrom, and Pearce (1991), as well as the approximate-efficiency results in Compte (1998), Obara (2009), and Chan and Zhang (2016).