In repeated normal-form games, simple penal codes (Abreu 1986, 1988) permit an elegant characterization of the set of subgame-perfect outcomes. We show that the logic of simple penal codes fails in repeated extensive-form games. We provide two examples illustrating that a subgame-perfect outcome...

We study transactions that require investments before trading in a competitive market, when forward contracts fixing the transaction price are absent. We show that, despite the market being perfectly competitive and subject to arbitrarily little uncertainty, the inability to jointly determine...

We present three examples of finitely repeated games with public monitoring that have sequential equilibria in private strategies, i.e., strategies that depend on own past actions as well as public signals. Such private sequential equilibria can have features quite unlike those of the more...

We describe the maximum efficient subgame perfect equiligrium payoff for a player in the repeated Prisoners' Dilemma, as a function of the discount factor. For discount factors above a critical level, every efficient, feasible, individually rational payoff profile can be sustained. For an open...

Consider two agents who learn the value of an unknown parameter by observing a sequence of private signals. The signals are independent and identically distributed across time but not necessarily agents. Does it follow that the agents will commonly learn its value, i.e., that the true value of...

Extreme adverse selection arises when private information has unbounded support, and market breakdown occurs when no trade is the only equilibrium outcome. We study extreme adverse selection via the limit behavior of a financial market as the support of private information converges to an...

Projects with negative expected value cannot obtain financing in competitive capital markets if all potential investors are risk neutral and have identical beliefs about the distribution of the project's net revenue. We present a series of examples with heterogeneous beliefs in which it is...

We examine an evolutionary model with "local interactions," so that some agents may be more likely to interact than others. We show that equilibrium strategy choices with given local interactions correspond to correlated equilibria of the underlying game, suggesting an new interpretation for...

We study why different markets are cleared by different types of prices---a universal price for all buyers and sellers in some markets, seller-specific prices that are uniform across buyers in others, and personalized prices tailored to both the buyer and the seller in yet others. We link these...

We examine markets in which agents make investments and then match into pairs, creating surpluses that depend on their investments and that can be split between the matched agents. In general, each of the matched agents would ”own" part of the surplus in the absence of interagent transfers....