Time Horizon of Games

Finite Infinite

(unspecified)

Original Equilibrium

of the Game.

In PD: D

Overvaluation of

Cooperation.

In PD: TFT

Under Finite Time Horizon

Selten’s Theorem: The equilibrium of the basic game will be the

SPE of the whole finitely repeated game also. In prisoner’s

dilemma this equilibrium is D.

Under Infinite Time Horizon

Folk theorem: If a one-shot game is infinitely repeated, then

essentially all distributions of individual rational payoffs can

be equilibria of the whole infinitely repeated game. The best

equilibrium candidate is TFT.