Template-Type: ReDIF-Paper 1.0

Author-Name: Barton L. Lipman
Author-X-Name-First:Barton  
Author-X-Name-Last: Lipman
Author-Email: blipman@bu.edu
Author-Workplace-Name: Department of Economics, Boston University

Author-Name: Ruqu Wang
Author-X-Name-First: Ruqu 
Author-X-Name-Last: Wang
Author-Email: wangr@qed.econ.queensu.ca
Author-Workplace-Name: Queen’s University

Title: Switching Costs in Infinitely Repeated Games1

Abstract: We show that small switching costs can have surprisingly dramatic effects in infinitely
repeated games if these costs are large relative to payoffs in a single period. This shows
that the results in Lipman and Wang [2000] do have analogs in the case of infinitely
repeated games. We also discuss whether the results here or those in Lipman–Wang
[2000] imply a discontinuity in the equilibrium outcome correspondence with respect to
small switching costs. We conclude that there is not a discontinuity with respect to
switching costs but that the switching costs do create a discontinuity with respect to the
length of a period.

Length:  45pages
Creation-Date: 2006-01
Revision-Date: 
Publication-Status: published, Games and Economic Behavior
File-URL: http://people.bu.edu/blipman/Papers/current-switch.pdf
File-Format: Application/pdf
File-Function: 
Number: WP2006-003
Classification-JEL: 
Keywords: 
Handle: RePEc:bos:wpaper:WP2006-003