This award funds a new approach to the study of game theoretic equilibria in two player repeated strategic situations with imperfect private monitoring. In such strategic situations, the players receive only noisy private signals about the past actions of the opponents. A simple example is a dynamic price-setting duopoly, where each firm can offer a secret price cut to the consumers. A firm's price choice is thus unobervable to its competitor and the sales level of each firm is its private signal.
The study of this class of games poses significant challenges because players face a complicated equilibrium inference problem. The PIs develop a new class of equilibria which generalizes previous equilibrium concepts and addresses some of the shortcomings of these concepts. The PIs use mathematical techniques to prove several results about this class of equilibria. In particular, they seek to establish that the equilibrium has a tractable recursive characterization.
Many real world strategic situations are best modelled as repeated games with private monitoring. A tractable way to analyze and predict equilibrium behavior will have a wide range of applications, especially to macroeconomics and to the analysis of how firms compete for consumers.
