Does Uncertain Future Hamper Cooperation?

Abstract

In this paper, a counter example is constructed to show that the equilibrium strategy of Fudenberg and Maskin (1986) can not be applied when players have incomplete information about the future stage game. When the future stage game is uncertain, players have ex-post incentive to deviate from the equilibrium strategy of Fudenberg and Maskin since the ex-ante future punishment is not sufficiently severe.