| Abstract |
We show that players can cooperate even when they interact only once, if they prepare and revise their actions before they actually interact. We propose a class of games called revision games, to formalize such a situation. In a revision game, players start with initially prepared actions, followed by a sequence of random revision opportunities. In the course of revisions players closely monitor each other's behavior. It is shown that players can cooperate, and that their behavior under the optimal equilibrium is described by a simple differential equation. In the case of quantity competition, players can achieve 97% of fully collusive profit.
|