Folk theorem

A family of results showing that repeated interaction can sustain many outcomes as equilibria, including outcomes that are not equilibria of a single interaction.

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Repeated game: A game in which the same strategic interaction occurs multiple times. Folk theorems characterize outcomes that repeated play can sustain.
Nash equilibrium: A strategy profile in which no player can gain by changing strategy alone. Folk theorems expand which equilibrium payoffs can arise under repetition.
Finite repeated game: A repeated game with a fixed, commonly known final period. Backward induction can eliminate cooperation that an indefinite horizon can sustain.
Tacit collusion: Coordination among competing firms to restrict competition without an explicit agreement. Repeated interaction can make above-competitive prices self-enforcing.
James W. Friedman: An economist known for formal work on repeated games and subgame-perfect equilibrium. His 1971 result established a prominent subgame-perfect version of the folk theorem.
Subgame-perfect equilibrium: A strategy profile that is a Nash equilibrium in every subgame. Many folk theorems establish sustainable outcomes using this refinement.
Stage game: The single-period game that is played repeatedly in a repeated game. Its actions and payoffs determine the repeated interaction's feasible outcomes.
Infinitely repeated game: A game whose stage interaction continues without a fixed final period. Indefinite continuation is a standard setting for broad folk-theorem results.
Cartel stability: The ability of a cartel to maintain coordinated behavior despite members' incentives to cheat. Future retaliation can deter cartel members from undercutting agreed terms.
Robert Aumann: An Israeli-American mathematician and economist who made foundational contributions to game theory. His work helped formalize equilibrium possibilities in infinitely repeated games.