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Stochastic Differential Games for Which the Open-Loop Equilibrium is Subgame Perfect

Author

Listed:
  • Ricardo Josa-Fombellida

    (Universidad de Valladolid)

  • Juan Pablo Rincón-Zapatero

    (Universidad Carlos III de Madrid)

Abstract

It is generally admitted that a correct forecasting of uncertain variables needs Markov decision rules. In a dynamic game environment, this belief is reinforced if one focuses on credible actions of the players. Usually, subgame perfectness requires equilibrium strategies to be constructed on Markov rules. It comes as a surprise that there are interesting classes of stochastic differential games where the equilibrium based on open-loop strategies is subgame perfect. This fact is well known for deterministic games. We explore here the stochastic case, not dealt with up to now, identifying different game structures leading to the subgame perfectness of the open-loop equilibrium.

Suggested Citation

  • Ricardo Josa-Fombellida & Juan Pablo Rincón-Zapatero, 2018. "Stochastic Differential Games for Which the Open-Loop Equilibrium is Subgame Perfect," Dynamic Games and Applications, Springer, vol. 8(2), pages 379-400, June.
    • Handle: RePEc:spr:dyngam:v:8:y:2018:i:2:d:10.1007_s13235-017-0221-y
    DOI: 10.1007/s13235-017-0221-y
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    References listed on IDEAS

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