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Secret Correlation in Repeated Games with Imperfect Monitoring

Paris-Jourdan Sciences Economiques, UMR CNRS-EHESS-ENPC-ENS 8545, 48 Boulevard Jourdan, 75014 Paris, France and MEDS, Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, Illinois 60208-2001
CEREMADE, UMR CNRS 7534, Université Paris-Dauphine, Place du Maréchal de Lattre de Tassigny, 75775 Paris, Cedex 16, France
gossner{at}ens.fr
tomala{at}ceremade.dauphine.fr

We characterize the maximum payoff that a team can guarantee against another in a class of repeated games with imperfect monitoring. Our result relies on the optimal tradeoff for the team between optimization of stage payoffs and generation of signals for future correlation.

Key Words: stochastic process; min–max values; signals; entropy; repeated games; secret correlation
History: Received: June 15, 2005; revision received: February 24, 2006;