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Repeated Games with Reciprocity Tend to Reduce the Payoffs for Both

question 358

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Repeated games with reciprocity tend to reduce the payoffs for both players, as compared to a one-time game with a similar payoff matrix.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present values.

Present Value

The current financial assessment of a sum of money in the future or ongoing cash flows, based on a specific rate of return.

Cash Flows

The movement of money into and out of a business, project, or financial product.

Growing Annuity

A series of cash flows that grow at a constant rate for a finite number of periods.

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