Three essays on repeated games

This thesis consists of three chapters. The first chapter analyzes the outcomes that can be supported in a society through reward and punishment schemes that operate through community enforcement (social norms). I consider a society of infinitely long-lived and very patient agents that are randomly matched in pairs every period to play a given game. I find that any mutually beneficial outcome can be supported by a self-enforcing social norm under both perfect information and a simple local information system. These Folk Theorem results explain not only how social norms can provide incentives to forestall opportunistic behavior and support cooperation in a community but also how they can support outcomes characterized by inequality.; The second chapter studies tacit collusion under interest rate fluctuations. In contrast to the existing literature on repeated games that assumes a fixed discount factor, I study an environment in which it is more realistic to assume a fluctuating discount factor. In a repeated oligopoly, as the interest rate changes, so too does the degree to which firms discount the future. I characterize the optimal tacit collusion equilibrium when the discount factor changes over time, under both price and quantity competition, and I show that collusive prices and profits depend not only on the level of the discount factor but also on its volatility. These results have important implications not only for the study of cooperation in repeated games but also for empirical studies of collusive pricing and the role that collusive pricing may play in economic cycles.; The third chapter presents experimental evidence on infinitely repeated games. While there is an extensive literature on the theory of infinitely repeated games, empirical evidence on how “the shadow of the future” affects behavior is scarce and inconclusive. I simulate infinitely repeated prisoner's dilemma games in the lab by having a random continuation rule. The experimental design represents an improvement over the existing literature by including sessions with finite repeated games as controls and a large number of players per session (which allows for learning without contagious effects). I find strong evidence that the shadow of the future reduces opportunistic behavior closely following the theoretical predictions.