seniorGame Theory
What is Folk Theorem in Game Theory?
Updated May 16, 2026
Short answer
The Folk Theorem states that many payoff outcomes can be sustained as equilibria in infinitely repeated games.
Deep explanation
The Folk Theorem shows that if players are sufficiently patient, any feasible and individually rational payoff can be sustained using appropriate punishment strategies. This highlights the power of repeated interaction in sustaining cooperation.
Real-world example
Used in sustaining cartels or long-term cooperation agreements.
Common mistakes
- Assuming only Nash equilibrium payoffs are achievable.
Follow-up questions
- What does 'patient players' mean?
- Why is punishment important?