Communication and Cooperation in Repeated Games
Yu Awaya*, Vijay Krishna
Last modified: 2017-04-18
Abstract
We study the role of communication in repeated games with private monitoring. In such games, players receive only noisy private signals about each other's actions. For a fixed discount factor, we identify conditions under which there are equilibria with "cheap talk" that result in nearly efficient payoffs, whereas all equilibria without such communication are bounded away from this outcome. Thus, in our model, communication is necessary for cooperation.