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Approximation of Nash equilibria in Bayesian games

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  • Olivier Armantier

    (Federal Reserve Bank of New York; University of Montreal; CIRANO and CIREQ, Montreal, Canada)

  • Jean-Pierre Florens

    (Toulouse School of Economics, France)

  • Jean-Francois Richard

    (Department of Economics, University of Pittsburgh, Pennsylvania, USA)

Abstract

We define a new concept of constrained strategic equilibrium (CSE) for Bayesian games. We show that a sequence of CSEs approximates an equilibrium under standard conditions. We also provide an algorithm to implement the CSE approximation method numerically in a broad class of Bayesian games, including games without analytically tractable solutions. Finally, we illustrate the flexibility of the CSE approximation with a series of auction examples, including a complex multi-unit auction. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.1040
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File URL: http://qed.econ.queensu.ca:80/jae/2008-v23.7/
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 23 (2008)
Issue (Month): 7 ()
Pages: 965-981

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Handle: RePEc:jae:japmet:v:23:y:2008:i:7:p:965-981

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References

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Cited by:
  1. Ollikka, Kimmo & Tukiainen , Janne, 2013. "Central bank liquidity auction mechanism design and the interbank market," Research Discussion Papers 21/2013, Bank of Finland.
  2. Timothy P. Hubbard & Harry J. Paarsch, 2012. "On the Numerical Solution of Equilibria in Auction Models with Asymmetries within the Private-Values Paradigm," Carlo Alberto Notebooks 291, Collegio Carlo Alberto.

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