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A Common Interest game is a game in which there exists a unique vector of payoffs which strictly Pareto-dominates all other payoffs. We consider the undiscounted repeated game obtained by the infinite repetition of such an n-player Common Interest game. We restrict supergame strategies to be computable within Church's thesis, and we introduce computable trembles on these strategies. If the trembles have sufficiently large support, the only equilibrium vector of payoffs which survives is the Pareto-efficient one. The result is driven by the ability of the players to use the early stages of the game to communicate their intention to play cooperatively in the future. The players 'take turns' to reveal their cooperative intentions, and the result is proved by 'backwards induction' on the set of players. We also show that our equilibrium selection result fails when there are a countable infinity of players. Download Paper
We identify and investigate the basic 'hold-up problem' which arises whenever each party to a contract has to pay some ex-ante cost for the contract to become feasible. We then proceed to show that, under plausible circumstances, a 'contractual solution' to this hold-up problem is not available. This is because a contractual solution to the hold-up problem typically entails writing a 'contract over a contract' which generates a fresh set of ex-ante costs, and hence is associated with a new hold-up problem. Download Paper