Abstract:
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This paper study repeated games where the time repetitions of the stage game are not known
or controlled by the players. We call this feature random monitoring. Kawamori's (2004) shows
that perfect random monitoring is always better than the canonical case. Surprisingly, when the
monitoring is public, the result is less clear-cut and does not generalize in a straightforward way.
Unless the public signals are sufficiently informative about player's actions and/or players are
patient enough. In addition to a discount effect, that tends to consistently favor the provision of
incentives, we found an information effect, associated with the time uncertainty on the distribution
of public signals. Whether payoff improvements are or not possible, depends crucially on the
direction and strength of these effects.
JEL: C73, D82, D86.
KEYWORDS: Repeated Games, Frequent Monitoring, Random Public Monitoring, Moral Hazard, Stochastic Processes. |