key term - Repeated games

Definition

Repeated games are strategic interactions where the same game is played multiple times by the same players, allowing for future consequences to influence current decisions. This setup enables players to develop strategies based on past actions, fostering cooperation or competition over time. The repeated nature of these games often leads to different outcomes compared to one-time interactions, as players can establish trust, punish bad behavior, or reward cooperation.

5 Must Know Facts For Your Next Test

1. In repeated games, players can build reputations based on their past behavior, which can significantly influence their strategic choices.
2. The possibility of future interactions often leads to more cooperative behavior than would be expected in a single-shot game.
3. Strategies in repeated games can include punishment for defection or reward for cooperation, which helps maintain stable cooperation among players.
4. The Folk Theorem states that in infinitely repeated games, a wide range of outcomes can be sustained as equilibria, depending on the strategies employed by the players.
5. Repeated games are crucial for understanding real-world scenarios like business negotiations and international relations, where relationships evolve over time.

Review Questions

• How do repeated games influence player behavior compared to one-time games?
  • Repeated games encourage players to consider the long-term consequences of their actions, fostering an environment where cooperation is more likely. In contrast to one-time games where players might act selfishly without concern for future repercussions, the prospect of future encounters in repeated games leads to strategies that prioritize building trust and maintaining relationships. This change in mindset can result in more collaborative outcomes as players seek to avoid retaliation for uncooperative behavior.
• Discuss how the concept of Nash Equilibrium applies to repeated games and the potential for multiple equilibria.
  • In repeated games, Nash Equilibria can take on more complexity due to the influence of past interactions. Players may achieve multiple equilibria based on their history, such as cooperative strategies being supported by threats of punishment for defection. The existence of these equilibria allows players to switch between cooperative and non-cooperative behaviors depending on their assessments of others' actions, demonstrating that the dynamics of repeated interactions can shape strategic outcomes significantly different from one-shot settings.
• Evaluate the impact of the Folk Theorem on understanding cooperation in infinitely repeated games and its implications for real-world scenarios.
  • The Folk Theorem asserts that in infinitely repeated games, a vast array of outcomes can be supported as equilibria, particularly those involving cooperation. This theorem suggests that if players value future payoffs enough, they can coordinate to achieve mutually beneficial outcomes by adopting strategies that punish deviations. In real-world situations like international treaties or business partnerships, this insight highlights the potential for sustained cooperation when parties are committed to ongoing relationships, providing a framework for addressing issues such as climate change or trade negotiations.

Related terms

Nash Equilibrium:

A situation in a game where no player can benefit from changing their strategy while others keep theirs unchanged.

Cooperative Game: A type of game where players can negotiate and form coalitions to achieve better outcomes than they could individually.

Strategy Profile: A complete description of the strategies chosen by all players in a game.