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Stochastic Games with Hidden States

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  • Yuichi Yamamoto

    (Department of Economics, University of Pennsylvania)

Abstract

This paper studies infinite-horizon stochastic games in which players observe noisy public information about a hidden state each period. We find that if the game is connected, the limit feasible payoff set exists and is invariant to the initial prior about the state. Building on this invariance result, we provide a recursive characterization of the equilibrium payoff set and establish the folk theorem. We also show that connectedness can be replaced with an even weaker condition, called asymptotic connectedness. Asymptotic connectedness is satisfied for generic signal distributions, if the state evolution is irreducible.

Suggested Citation

  • Yuichi Yamamoto, 2015. "Stochastic Games with Hidden States," PIER Working Paper Archive 15-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:15-007
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    References listed on IDEAS

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    11. Drew Fudenberg & Yuichi Yamamoto, 2010. "Repeated Games Where the Payoffs and Monitoring Structure Are Unknown," Econometrica, Econometric Society, vol. 78(5), pages 1673-1710, September.
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    Cited by:

    1. Mitsuhiro Nakamura & Hisashi Ohtsuki, 2016. "Optimal Decision Rules in Repeated Games Where Players Infer an Opponent’s Mind via Simplified Belief Calculation," Games, MDPI, vol. 7(3), pages 1-23, July.
    2. Kimmo Berg, 2016. "Elementary Subpaths in Discounted Stochastic Games," Dynamic Games and Applications, Springer, vol. 6(3), pages 304-323, September.

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    More about this item

    Keywords

    stochastic game; hidden state; connectedness; stochastic selfgeneration; folk theorem;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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