Switching costs in infinitely repeated games

Lipman, Barton L.; Wang, Ruqu

doi:10.1016/j.geb.2008.04.018

Cited by 19 publications

(15 citation statements)

References 10 publications

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“…In this model a player has to pay a fixed cost whenever playing different actions in two consecutive stages. Similarly to our cost structure, the switching cost in Lipman and Wang (2009) is much higher than the stage payoff. Nevertheless they obtain a folk theorem.…”

Section: The Literature On Games With Imperfect Monitoringmentioning

confidence: 88%

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High frequency repeated games with costly monitoring

Lehrer

Solan

2018

Theoretical Economics

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We study two-player discounted repeated games in which one player cannot monitor the other unless he pays a fixed amount. It is well known that in such a model the folk theorem holds when the monitoring cost is on the order of magnitude of the stage payoff. We analyze high frequency games in which the monitoring cost is small but still significantly higher than the stage payoff. We characterize the limit set of public perfect equilibrium payoffs as the monitoring cost tends to 0. It turns out that this set is typically a strict subset of the set of feasible and individually rational payoffs. In particular, there might be efficient and individually rational payoffs that cannot be sustained in equilibrium. We also make an interesting connection between games with costly monitoring and games played between long-lived and short-lived players. Finally, we show that the limit set of public perfect equilibrium payoffs coincides with the limit set of Nash equilibrium payoffs. This implies that our characterization applies also to sequential equilibria.

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Section: The Literature On Games With Imperfect Monitoringmentioning

confidence: 88%

“…Another related paper in a different strand of literature is Lipman and Wang (2009), who studied repeated games with switching costs. In this model a player has to pay a fixed cost whenever playing different actions in two consecutive stages.…”

Section: The Literature On Games With Imperfect Monitoringmentioning

confidence: 99%

High frequency repeated games with costly monitoring

Lehrer

Solan

2018

Theoretical Economics

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“…For their part, Lipman and Wang (2000, 2009) introduced the concept of switching costs . In particular, the authors modify the standard repeated game model by adding a small cost endured by the players when they change their actions between two subsequent periods.…”

Section: Perfect Monitoringmentioning

confidence: 99%

Repeated games for multiagent systems: a survey

Burkov

Chaib-draa

2013

The Knowledge Engineering Review

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Repeated games are an important mathematical formalism to model and study long-term economic interactions between multiple self-interested parties (individuals or groups of individuals). They open attractive perspectives in modeling long-term multiagent interactions. This overview paper discusses the most important results that actually exist for repeated games. These results arise from both economics and computer science. Contrary to a number of existing surveys of repeated games, most of which originated from the economic research community, we are first to pay a special attention to a number of important distinctive features proper to artificial agents. More precisely, artificial agents, as opposed to the human agents mainly aimed by the economic research, are usually bounded whether in terms of memory or performance. Therefore, their decisions have to be based on the strategies defined using finite representations. Furthermore, these strategies have to be efficiently computed or approximated using a limited computational resource usually available to artificial agents.

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“…They show that high switching costs may benefit the buyer by inducing suppliers to price more competitively. Lipman and Wang [20] show that even small switching costs may make it credible not to change action in finitely repeated games. Klemperer [14] surveys the extensive "switching costs" literature.…”

Section: Introductionmentioning

confidence: 99%

Switching costs, dynamic uncertainty, and buyer–seller relationships

Murthy

Shrikhande

Subramanian

2007

Naval Research Logistics

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Abstract:We analyze strategic relationships between buyers and sellers in markets with switching costs and dynamic uncertainty by investigating the scenario wherein a representative buyer trades with two foreign sellers located in the same foreign country. We show that, under exchange rate uncertainty, switching costs may lead to switching equilibria where both sellers co-exist in the market with the buyer, or no-switching equilibria where either seller captures the market. The presence of exchange rate uncertainty facilitates competition by allowing the sellers to co-exist in the market with the buyer. However, if the level of uncertainty is beyond a threshold, the only viable equilibria are those where one of the sellers captures the market. Further, depending on the level of exchange rate uncertainty and the sellers' variable costs, switching costs may either raise or lower the level of prices in long-term contracts between the buyer and the sellers.

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Switching costs in infinitely repeated games

Cited by 19 publications

References 10 publications

High frequency repeated games with costly monitoring

High frequency repeated games with costly monitoring

Repeated games for multiagent systems: a survey

Switching costs, dynamic uncertainty, and buyer–seller relationships

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