Coordination failure in repeated games with private monitoring

Abstract

Abstract Players coordinate continuation play in repeated games with public monitoring. We investigate the robustness of such equilibrium behavior with respect to ex-ante small private-monitoring perturbations. We show that with full support of public signals, no perfect public equilibrium is robust if it induces a “regular” 2 × 2 coordination game in the continuation play. This regularity condition is violated in all belief-free equilibria. Indeed, with an individual full rank condition, every interior belief-free equilibrium is robust. We also analyze block belief-free equilibria and point out that the notion of robustness is sensitive to whether we allow for uninterpretable signals.