Tilburg University
Informational Constraints and the Overlapping Generations Model
Bhaskar, V.
Publication date:
1994
Link to publication in Tilburg University Research Portal
Citation for published version (APA):
Bhaskar, V. (1994).
Informational Constraints and the Overlapping Generations Model: Folk and Anti-Folk
Theorems
. (CentER Discussion Paper; Vol. 1994-85). CentER.
General rights
Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners
and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights.
• Users may download and print one copy of any publication from the public portal for the purpose of private study or research.
• You may not further distribute the material or use it for any profit-making activity or commercial gain
• You may freely distribute the URL identifying the publication in the public portal
Take down policy
If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately
and investigate your claim.
Download date: 10. aug.. 2022
~
~~~
Di
sc
u
ss
i
o
n
for
a
er
8414
,~c
Research
p
1994
NR.85
~
~
,,~Q~'
,
~~`~0r
~j
,
,
II
I
II
I
III
I
I
I
lu
l
l
N
I
IIN
I
II
II
~
I
III
I
I
II
I
I
II
I
I
I
II
Center
for
Economic
Research
No.
9485
INFORMATIONAL
CONSTRAINTS
AND
THE
OVERLAPPING
GENERATIONS
MODEL:
FOLK
AND
ANTI-FOLK
THEOREMS
by
V.
Bhaskar
October
1994
~
33
ISSN
0924-7815
D
K.U.B.
BIBLIOTHEEK
`
TILBURG
INFORNATIONAL
CONSTRAINTS
AND THE
OVERLAPPING GENERATIONS
MODEL
FOLK
AND
ANTI-FOLK
THEOREMS
V.
Bhaskar
October
1994
Delhi School
of
Economics
~
Center
for
Economic
Research,
Tilburg
Abstract
It
is
well
known
that
inter-generational
transfers
can be
suppported
by subgame
perfect
equilibria
in
Samuelson's
consumption
loan
model
if
every generation
is
perfectly
informed about past
events.
This
paper
relaxes
the
perfect
information
assumption
minimally,
and finds
that
transfers
cannot be
supported
by
pure-atrategy
sequential
equilibria
if
the
transferable
commodity
is
finitely
divisible.
Mixed
strategies
allow
transfers
to
be sustained, so that a
version
of
the
Folk
theorem
holds
with
informational
constraints.
However,
these
equilibria
are
not
robust.
If
each
agent's
utility
function
is
subjected
to
a
small
random
perturbation,
these
mixed
strategy
equilibria
unravel,
and
only
the zero-
transfer
allocation
survives
as
the
unique
rationalizable
outcome.
These
results
extend
when
we
allow
the
commodity
to
be
perfectly
divisible, and also
apply
to
a
class
of
repeated
games
played
by
overlapping
generations
of
players
which
includes
the
prisoners'
dilemma.
We
suggest that
money
may
play
an
informational role in
this
context,
as a
device
for
overcoming
the
boundedness
of social
memory.
Keywords:
dynamic games of
imperfect
information,
purification
of
mixed
strategies,
information
and
complexity,
money
and
information.
~
Address
for
correspondence:
until
15
December
1994:
CentER
for
Economic
Research,
Tilburg,
email:
bhaskarc~kub.nl.
16
Dec
1994
-
June
1995:
Dept.
del
Analisis
Economico,
Universidad
de
Alicante,
Campus
San Vicente,
03071,
Spain.
I
am grateful to Eric van
Damme,
Dilip
Mookherjee
and to
audiences
at
Alicante,
CentER,
the Delhi
School
of
Economica
and
the
Indian
Statistical
Institute,
for their
comments.