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Stochastic Games With Hidden States, Fourth Version

Author

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  • Yuichi Yamamoto

    (Department of Economics, University of Pennsylvania)

Abstract

This paper studies infinite-horizon stochastic games in which players observe payoffs and noisy public information about a hidden state each period.We find that, very generally, the feasible and individually rational payoff set is invariant to the initial prior about the state in the limit as the discount factor goes to one. This result ensures that players can punish or reward the opponents via continuation payoffs in a flexible way. Then we prove the folk theorem, assuming that public randomization is available. The proof is constructive, and introduces the idea of random blocks to design an effective punishment mechanism.

Suggested Citation

  • Yuichi Yamamoto, 2014. "Stochastic Games With Hidden States, Fourth Version," PIER Working Paper Archive 16-012, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 09 Nov 2017.
  • Handle: RePEc:pen:papers:16-012
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    References listed on IDEAS

    as
    1. Fudenberg, Drew & Yamamoto, Yuichi, 2011. "The folk theorem for irreducible stochastic games with imperfect public monitoring," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1664-1683, July.
    2. Johannes Hörner & Satoru Takahashi & Nicolas Vieille, 2015. "Truthful Equilibria in Dynamic Bayesian Games," Econometrica, Econometric Society, vol. 83(5), pages 1795-1848, September.
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    5. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
    6. Susan Athey & Kyle Bagwell, 2008. "Collusion With Persistent Cost Shocks," Econometrica, Econometric Society, vol. 76(3), pages 493-540, May.
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    10. ,, 2012. "A partial folk theorem for games with private learning," Theoretical Economics, Econometric Society, vol. 7(2), May.
    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.
    12. Cristina Arellano, 2008. "Default Risk and Income Fluctuations in Emerging Economies," American Economic Review, American Economic Association, vol. 98(3), pages 690-712, June.
    13. Fudenberg, Drew & Yamamoto, Yuichi, 2011. "Learning from private information in noisy repeated games," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1733-1769, September.
    14. Michihiro Kandori, 1992. "The Use of Information in Repeated Games with Imperfect Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(3), pages 581-593.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    stochastic game; hidden state; uniform connectedness; robust connectedness; random blocks; 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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