That strategic rivalry in a long-term relationship may differ from that of a one-shot game is by now quite a familiar idea. Repeated play allows players to respond to each other’s actions, and so each player must consider the reactions of his opponents in making his decision. The fear of retaliation may thus lead to outcomes that otherwise would not occur. The most dramatic expression of this phenomenon is the celebrated Folk Theorem. An outcome that Pareto dominates the minimax point is called individually rational. The Folk Theorem asserts that any individually rational outcome can arise as a Nash equilibrium in infinitely repeated games with sufficiently little discounting.

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About Eric Maskin

Eric Maskin was American nobel laureate in economics. Eric Stark Maskin is an American economist and mathematician. He was jointly awarded the 2007 Nobel Memorial Prize in Economic Sciences with Leonid Hurwicz and Roger Myerson "for having laid the foundations of mechanism design theory". Read more on Wikipedia →

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