Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
We study infinitely repeated two player games with perfect information, where each period consists of two stages: one in which the parties simultaneously choose an action and one in which they can transfer money to each other. We first derive simple conditions that allow a constructive characterization of all Pareto-optimal subgame perfect payoffs for all discount factors. Afterwards, we examine different concepts of renegotiation-proofness and extend the characterization to renegotiation-proof payoffs.
renegotiation infinitely repeated games side payments optimal penal codes