Immediately Reactive Equilibria in Infinitely Repeated Games with Additively Separable Continuous Payoffs

This paper studies a class of in¯nitely repeated games with two players in which the action space of each player is an interval, and the one- shot payo® of each player is additively separable in their actions. We de¯ne an immediately reactive equilibrium (IRE) as a pure-strategy subgame perfect equilibrium such that the action of each player is a stationary function of the last action of the other player. We show that the set of IREs in the simultaneous move game is identical to that in the alternating move game. In both games, IREs are com- pletely characterized in terms of indi®erence curves associated with what we call e®ective payo®s. A folk-type theorem using only IREs is established in a special case. Our results are applied to a prisoner's dilemma game with observable mixed strategies and a duopoly game. In the latter game, kinked demand curves with a globally stable steady state are derived.21世紀COEプログラム = 21st-Century COE Program41 p