Domenico Mergoni Cecchelli

Refundable Deposits: How to Restore Cooperation in Finitely Repeated Games

While infinitely repeated games admit a rich set of Nash equilibria, finitely repeated games typically have a much smaller and often inefficient one. We show how to enlarge this set using deposits: in each period a player may place a refundable sum with a neutral intermediary, returned when the game ends and forfeited...