Reputation and dynamic stackelberg leadership in infinitely repeated games

The paper studies a repeated game in which a long-run player without discounting faces another long-run player with strict discounting. The game is perturbed so that there is uncertainty in the patient player's strategy choice: she may be a rational player. but she may also be one of many irrational types who are committed to various repeated game strategies, The rational patient player's equilibrium payoff in this perturbed game is analyzed. In particular, it is shown that the lower bound on her payoff in the set of (extensive-form) trembling-hand perfect equilibria is given by her Stackelberg payoff in a dynamics sense. (C) 1996 Academic Press. Inc.