Construct · 1 fields · 2 citations

folk theorem: a standalone construct

One name. One construct. A landmark on the map.

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folktheorem1 CONSTRUCTFolk theoremFRIEDMAN · 1971

A single standalone construct; nearby constructs are located against it in the Collider. Tap a field for its definition, unit, and measures.

Game theory

the result that in repeated games almost any outcome giving players their minimum can be sustained by threat of punishment.

The folk theorem is a central result about repeated games: when a game is played over and over by patient players, almost any outcome that gives each player at least their guaranteed minimum can be sustained as an equilibrium, held in place by the threat of future punishment for anyone who deviates. It explains how cooperation that is impossible in a one-shot game (such as the prisoner's dilemma) can be rational when the relationship continues. The idea was "folklore" known informally before publication; Friedman gave an early formal version using reversion to a one-shot equilibrium, and Fudenberg and Maskin established sharp versions with discounting.[1][2]

Unit
The set of average payoffs sustainable as equilibria of the repeated game
Recovery means
Not applicable
Measured by
Characterised by the set of feasible, individually rational payoffs supportable when players are patient enough (discount factor near one)

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Nearby constructs

grim trigger1 fields · 1 citationsanchor · repeated gamescooperation4 fields · 4 citationsjingle · one word, four constructsequilibrium4 fields · 4 citationsjingle · one word, four constructs

References

  1. Friedman, J. W. (1971). A non-cooperative equilibrium for supergames. The Review of Economic Studies, 38(1), 1–12. https://doi.org/10.2307/2296617
  2. Fudenberg, D., & Maskin, E. (1986). The folk theorem in repeated games with discounting or with incomplete information. Econometrica, 54(3), 533–554. https://doi.org/10.2307/1911307

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