A Folk Theorem for Minority Games

Posted: 12 Mar 2012

See all articles by Jerome Renault

Jerome Renault

University of Toulouse 1 - Toulouse School of Economics (TSE)

sergio scarlatti

affiliation not provided to SSRN

Marco Scarsini

Luiss University Dipartimento di Economia e Finanza

Date Written: March, 11 2012

Abstract

We study a particular case of repeated games with public signals. In the stage game an odd number of players have to choose simultaneously one of two rooms. The players who choose the less crowded room receive a reward of one euro (whence the name “minority game”). The players in the same room do not recognize each other, and between the stages only the current majority room is publicly announced. We show that in the infinitely repeated game any feasible payoff can be achieved as a uniform equilibrium payoff, and as an almost sure equilibrium payoff. In particular we construct an inefficient equilibrium where, with probability one, all players choose the same room at almost all stages. This equilibrium is sustained by punishment phases which use, in an unusual way, the pure actions that were played before the start of the punishment.

Keywords: Repeated games, Imperfect monitoring, Public signals

JEL Classification: C72

Suggested Citation

Renault, Jerome and scarlatti, sergio and Scarsini, Marco, A Folk Theorem for Minority Games (March, 11 2012). Games and Economic Behavior, Vol. 53, No. 2, 2005, Available at SSRN: https://ssrn.com/abstract=2019816

Jerome Renault

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Sergio Scarlatti

affiliation not provided to SSRN

Marco Scarsini (Contact Author)

Luiss University Dipartimento di Economia e Finanza ( email )

Viale Romania 32
Rome, RM 00197
Italy

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