Computer Science Theory Seminar
This paper formulates an approach and a notion of stability to study repeated interaction among individuals and coalitions in which coalitions can commit in the short-term but not the long-term. We study norms of behavior that are self-enforcing in this spirit: namely, no coalition of players has a profitable one-shot deviation from this norm. In settings with perfect monitoring, a self-enforcing norm can implement any payoff that is feasible and individually rational so long as players are perfectly patient. This folk theorem coincides with that for sub-game perfect equilibria in repeated games of perfect monitoring, despite the potential for coalitional deviations. We contrast this folk theorem with an anti-folk theorem that emerges once coalitions can make secret transfers to each other. In that latter case, a self-enforcing norm implements payoffs within the "Beta-core" of the stage-game. We interpret this paper to understand how legal and political institutions can have real authority on the behavior of individuals and coalitions by shaping their expectations of future behavior.