Collusion when players take turns

Abstract

We present a model of two players who take turns to facilitate collusion. One of the players wins (contract, office), while the other loses by presenting a ludicrous proposal or no proposal at all. Assuming that players use grim trigger strategies, we show that it is possible to sustain agreements as a Subgame Perfect Nash Equilibrium (a) for a range of discount factors below one but above zero and (b) for two disjoint intervals of the discount factor.