Folk Theorem with a Continuum of Public Signals

Abstract

We extend Fudenberg and Levine’s (1994) characterization of the limit set of perfect public equilibrium payoffs of repeated games with imperfect public monitoring as the discount factor approaches one to that of repeated games in which the set of public signals is a continuum. Using this characterization, we provide folk theorems requiring full rank conditions that imply the satisfaction of the conditions of Fudenberg et al.(1994) in an associated game with a finite set of public signals. We finally apply a folk theorem to the analysis of collusion among firms in an oligopoly considered by Green and Porter (1984).