UNET Seminar: Mikhail Safronov (University of Cambridge)

This is an in-person event

Title: Strategic renegotiation in repeated games (with Bruno Strulovici) 

Abstract: Repeated interactions among people feature a variety of possible equilibrium outcomes, making it hard to obtain predictions. We introduce a protocol of renegotiation, which refines the set of equilibria to essentially a unique equilibrium outcome, in a class of two-player games. The refinement satisfies intuitive comparative statics. A player gets a higher payoff at the expense of their opponent if either the player gains more from deviating, or it becomes harder to punish the player. Perhaps surprisingly, sometimes players may not be willing to invest in reducing cost of cooperation with other players. Reducing costs means the player will have less benefits from deviation hence their threat of deviation is smaller. As a result, they get a smaller share of the total pie.