Modeling the Continual Interactions by Repeated Games of Two Agents

We construct one equilibrium named equilibrium of continual interactions in infinitely repeated games of two agents with discounting and perfect monitoring. The framework of the associated simple strategy profile is used to describe this equilibrium. This framework comprises three outcomes each of which specifies an infinite sequence of one-period action profiles. The outcome of interactions specifies agents´ interaction without terminations and each of other two specifies the termination triggered by the corresponding agent. At the interaction of the equilibrium, both two agents suffer no losses and may have chance to achieve the most efficient payoffs. Agents can charaterize the interaction by this equilibrium, that is, if the interaction satisfies equilibrium of continual interactions, then neither agent has incentive to trigger the termination of their interaction and they have a continual interaction, otherwise they have a terminated interaction. This equilibrium also forgives occasional deviations if the interaction is robust enough.