This paper considers a class of two-player dynamic games in which each player controls a one-dimensional action variable, interpreted as a level of cooperation. The dynamics are due to an irreversibility constraint: neither player can ever reduce his cooperation level. Payoffs are decreasing in one's own action, increasing in one's opponent's action. We characterize efficient symmetric equilibrium action paths; actions rise gradually over time and converge, when payoffs are smooth, to a level strictly below the one-shot efficient level, no matter how little discounting takes place. The analysis is extended to incorporate sequential moves and asymmetric equilibria.
|Number of pages||18|
|Journal||Review of Economic Studies|
|Publication status||Published - Apr 2002|
- repeated games
- public goods