Infinitely repeated games with public monitoring and monetary transfers

In this paper, we study infinitely repeated games with imperfect public monitoring and the possibility of monetary transfers. We develop an efficient algorithm to compute the set of pure strategy public perfect equilibrium payoffs for each discount factor. We also show how all equilibrium payoffs can be implemented with a simple class of stationary equilibria that use stick-and-carrot punishments. Department of Economics, University of Bonn, Adenauerallee 24-42, 53113 Bonn, Germany. Emails: sohlendo@uni-bonn, [email protected]. Financial support from Deutsche Forschungsgemeinschaft through SFB-TR 15 is gratefully acknowledged.