A BEJTE Contributions article.

Abstract

In repeated games, equilibrium often requires that any deviation be punished in the continuation, regardless of whether it is beneficial to the other players. It seems against the nature of non-cooperative game theory for the other players to decide what to do based on what one player did, rather than on the well-being of themselves. We introduce a new solution concept called a forgiving-proof equilibrium that recommends continuing as if nothing had happened after a player deviates without harming the others. A folk theorem is established to characterize the set of forgiving-proof equilibrium payoffs when players are sufficiently patient. The concept of forgiving-proof equilibrium significantly reduces the set of equilibrium outcomes in many repeated games.

Submitted: November 14, 2007 · Accepted: December 26, 2007 · Published: February 11, 2008

Recommended Citation

Aramendia, Miguel; Ruiz, Luis; and Wen, Quan (2008) "Forgiving-Proof Equilibrium in Infinitely Repeated Games," The B.E. Journal of Theoretical Economics: Vol. 8 : Iss. 1 (Contributions), Article 5.
Available at: http://www.bepress.com/bejte/vol8/iss1/art5