This video shows how repeated games work. By using the prisoner’s dilemma, we analyse how repeated games might have different results depending on whether they have a finite or infinite number of repetitions.
In game theory, repeated games, also known as supergames, are those that play out over and over for a period of time, and therefore are usually represented using the extensive form. As opposed to one-shot games, repeated games introduce a new series of incentives: the possibility of cooperating means that we may decide to compromise in order to carry on receiving a payoff over time, knowing that if we do not uphold our end of the deal, our opponent may decide not to either. Our offer of cooperation or our threat to cease cooperation has to be credible in order for our opponent to uphold their end of the bargain. Working out whether credibility is merited simply involves working out what weighs more: the payoff we stand to gain if we break our pact at any given moment and gain an exceptional, one off payoff, or continued cooperation with lower payoffs which may or may not add up to more over a given time. Therefore, each player must consider their opponent’s possible punishment strategies.
This means that the strategy space is greater than in any regular simultaneous or sequential game. Each player will determine their strategies or moves taking into account all previous moves up until that moment. Also, since each player will take into account this information, they will play the game based on the behaviour of the opponent, and therefore must consider also possible changes in the behaviour of the latter when making choices.
Learn more by reading the dictionary entry.