Mixed Strategy Equilibria in Repeated Games with One-Period Memory

Infinitely repeated games is the pre-dominant paradigm within which economists study long-term strategic interaction. The standard framework allows players to condition their strategies on all past actions; that is, assumes that they have unbounded memory. That is clearly a convenient simplification that is at odds with reality. In this paper we restrict attention to one-period memory and characterize all totally mixed equilibria. In particular, we focus on strongly mixed equilibria. We provide conditions that are necessary and sufficient for a game to have such an equilibrium. We further demonstrate the exact set of payoffs that can be generated by such equilibria.