This article shows why self-interested agents manage to cooperate in a long-term relationship. When agents interact only once, they often have an incentive to deviate from cooperation. In a repeated interaction, however, any mutually beneficial outcome can be sustained in an equilibrium. This fact, known as the folk theorem, is explained under various information structures. This article also compares repeated games with other means to achieve efficiency, and briefly discusses the scope for potential applications.
Antitrust enforcement Bargaining Cartels Collusion Contract theory Cooperation and its evolution Correlated equilibrium Equilibrium selection Finite horizons Folk th Imperfect monitoring Infinite horizons Informal contracts International policy coordination Long-term relationships Mechanism design Multiple equilibria Perfect monitoring Private monitoring Public monitoring Repeated games Relational contracts Subgame perfect equilibrium Trigger strategy Uniqueness of equilibrium
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