WHEN AND HOW THE PUNISHMENT MUST FIT THE CRIME

In repeated normal-form (simultaneous-move) games, simple penal codes (Abreu, Journal of Economic Theory 39(1) (1986), 191-225; and Econometrica 56(2) (1988), 383-96) permit an elegant characterization of the set of subgame-perfect outcomes. We show that in repeated extensive-form games such a chara...

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Bibliographic Details
Published inInternational economic review (Philadelphia) Vol. 58; no. 2; pp. 315 - 330
Main Authors Mailath, George J., Nocke, Volker, White, Lucy
Format Journal Article
LanguageEnglish
Published Philadelphia Wiley Periodicals, Inc 01.05.2017
Blackwell Publishing Ltd
Subjects
Corporal punishment
Crime
Deviation
Economic models
Economic theory
Game theory
Games
Identity
Property
Punishment
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Summary:In repeated normal-form (simultaneous-move) games, simple penal codes (Abreu, Journal of Economic Theory 39(1) (1986), 191-225; and Econometrica 56(2) (1988), 383-96) permit an elegant characterization of the set of subgame-perfect outcomes. We show that in repeated extensive-form games such a characterization no longer obtains. By means of examples, we identify two types of settings in which a subgame-perfect outcome may be supported only by a profile with the property that the continuation play after a deviation is tailored not only to the identity of the deviator but also to the nature of the deviation.
Bibliography:Mailath thanks the National Science Foundation for research support (grants SES‐0350969). Nocke is grateful for financial support from the European Research Council (grant no. 313623). This is a major revision of “When the Punishment Must Fit the Crime: Remarks on the Failure of Simple Penal Codes in Extensive‐Form Games,” originally circulated in 2004. We thank the editor Simon Board and three anonymous referees for helpful comments and Larry Samuelson for helpful discussions.
ISSN:0020-6598
1468-2354
DOI:10.1111/iere.12219