Finitely repeated games with monitoring options

We study a model of finitely repeated games where the players can decide whether to monitor the other players’ actions or not each period. The standard model of repeated games can be interpreted as a model where the players automatically monitor each other. Monitoring is assumed to be private and costless. Hence it is weakly dominant to monitor the other players each period. We thus ask whether the option not to monitor the other players expands the equilibrium payoff vector set. In the context of finitely repeated games with a unique stage game equilibrium, we provide a sufficient condition for a folk theorem when the horizon is sufficiently long. JEL Classification: C72, C73.