Theoretical analysis demonstrates pure strategy subgame perfect equilibria in discounted repeated games, suggesting optimal penal codes streamline complex dynamic strategic interactions.
This paper presents a systematic framework for studying infinitely-repeated games with discounting, focusing on pure strategy (subgame) perfect equilibria. It introduces a number of concepts whi ch organize the theory in a natural way. These include the idea of an optimal penal code, and the related notions of simple penal codes an d simple strategy profiles.
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Dilip Abreu (1988) studied this question.
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