Colombo, Luca; Labrecciosa, Paola; Lambertini, Luca - Rimini Centre for Economic Analysis (RCEA) - 2008
The seminal paper by Abreu (1986) is revisited to reassess the optimality of one-shot stick-and-carrot punishments. It is shown that there are admissible conditions under which the use of grim trigger strategies with an infinite Nash reversion is more efficient than implementing Abreu’s penal...