David G. Pearce

Psychological games and sequential rationality

Abstract In psychological games the payoff to each player depends not only on what every player does but also on what he thinks every player believes, and on what he thinks they believe others believe, and so on. In equilibrium, beliefs are assumed to correspond to reality. Yet psychological games and psychological equilibria allow one to model belief-dependent emotions such as anger and surprise that are problematic for conventional game theory. We are particularly interested in issues of sequential rationality for psychological games. We show that although backward induction cannot be applied, and “perfect” psychological equilibria may not exist, subgame perfect and sequential equilibria always do exist.

Optimal Cartel Equilibria with Imperfect monitoring

There exist optimal symmetric equilibria in the Green-Porter model [5, 8] having an elementary intertemporal structure. Such an equilibrium is described entirely by two subsets of price space and two quantities, the only production levels used by firms in any contingency. The central technique employed in the analysis is the reduction of the repeated game to a family of static games.

Information and Timing in Repeated Partnerships

In a repeated partnership game with imperfect monitoring, the authors distinguish among the effects of (1) reducing the interest rate, (2) shortening the period over which actions are held fixed, and (3) shortening the lag with which accumulated information is reported. All three changes are equivalent in games with perfect monitoring. With imperfect monitoring, reducing the interest rate always increases the possibilities for cooperation, but the other two changes always have the reverse effect when the interest rate is small. Copyright 1991 by The Econometric Society.

A bound on the proportion of pure strategy equilibria in generic games

In a generic finite normal form game with 2α + 1 Nash equilibria, at least α of the equilibria are nondegenerate mixed strategy equilibria (that is, they involve randomization by some players).

A Perspective on Renegotiation in Repeated Games

In this paper we discuss the conceptual foundations of one approach to modelling renegotiation in repeated games. Renegotiation-proof equilibria are viewed as social conventions that players continue to find beneficial after every history. The theory can be understood in terms of stationary stable sets of credible deviations.