The Folk theorem for dominance solutions

Abstract. The known variants of the Folk theorem characterize the sets of equilibria for repeated games. The present paper considers dominance solutions of finitely repeated games and discounted supergames with perturbed payoff functions. The paper shows that for a normal form game the set of dominance solution payoff vectors of the T-fold repetitions converges to the set of feasible and individually rational payoffs as T tends to infinity and the perturbation value tends to 0. A similar theorem is proved for supergames as the discount factor tends to 1.

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