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Noisy Stochastic Games

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  • John Duggan

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    (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158)

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    Abstract

    This paper establishes existence of a stationary Markov perfect equilibrium in general stochastic games with noise—a component of the state that is nonatomically distributed and not directly affected by the previous period’s state and actions. Noise may be simply a payoff-irrelevant public randomization device, delivering known results on existence of correlated equilibrium as a special case. More generally, noise can take the form of shocks that enter into players’ stage payoffs and the transition probability on states. The existence result is applied to a model of industry dynamics and to a model of dynamic electoral competition.

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    File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_570.pdf
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    Bibliographic Info

    Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 570.

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    Length: 35 pages
    Date of creation: Feb 2012
    Date of revision:
    Handle: RePEc:roc:rocher:570

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    Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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    References

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    1. James Bergin & Dan Bernhardt, 1989. "Anonymous Sequential Games with Aggregate Uncertainty," Working Papers, Queen's University, Department of Economics 760, Queen's University, Department of Economics.
    2. Doraszelski, Ulrich & Escobar, Juan, 2010. "A theory of regular Markov perfect equilibria in dynamic stochastic games: genericity, stability, and purification," Theoretical Economics, Econometric Society, Econometric Society, vol. 5(3), September.
    3. Horst, Ulrich, 2005. "Stationary equilibria in discounted stochastic games with weakly interacting players," Games and Economic Behavior, Elsevier, Elsevier, vol. 51(1), pages 83-108, April.
    4. Herings, P. Jean-Jacques & Peeters, Ronald J. A. P., 2004. "Stationary equilibria in stochastic games: structure, selection, and computation," Journal of Economic Theory, Elsevier, Elsevier, vol. 118(1), pages 32-60, September.
    5. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
    6. Andrzej Nowak, 2003. "On a new class of nonzero-sum discounted stochastic games having stationary Nash equilibrium points," International Journal of Game Theory, Springer, Springer, vol. 32(1), pages 121-132, December.
    7. Harris, Christopher & Reny, Philip & Robson, Arthur, 1995. "The Existence of Subgame-Perfect Equilibrium in Continuous Games with Almost Perfect Information: A Case for Public Randomization," Econometrica, Econometric Society, Econometric Society, vol. 63(3), pages 507-44, May.
    8. James Bergin & Dan Bernhardt, 2006. "Industry Dynamics with Stochastic Demand," Working Papers, Queen's University, Department of Economics 1043, Queen's University, Department of Economics.
    9. Andrzej Nowak, 2007. "On stochastic games in economics," Computational Statistics, Springer, Springer, vol. 66(3), pages 513-530, December.
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    Cited by:
    1. He, Wei & Sun, Yeneng, 2013. "Stationary Markov Perfect Equilibria in Discounted Stochastic Games," MPRA Paper 51274, University Library of Munich, Germany.
    2. Jean Guillaume Forand & John Duggan, 2013. "Markovian Elections," Working Papers 1305, University of Waterloo, Department of Economics, revised Oct 2013.
    3. Jean Guillaume Forand & John Duggan, 2014. "Markovian Elections," 2014 Meeting Papers, Society for Economic Dynamics 153, Society for Economic Dynamics.
    4. Wei He & Yeneng Sun, 2013. "Stationary Markov Perfect Equilibria in Discounted Stochastic Games," Papers 1311.1562, arXiv.org.
    5. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers, Centro de Investigacion Economica, ITAM 1403, Centro de Investigacion Economica, ITAM.
    6. Łukasz Balbus & Kevin Reffett & Łukasz Woźny, 2013. "Markov Stationary Equilibria in Stochastic Supermodular Games with Imperfect Private and Public Information," Dynamic Games and Applications, Springer, Springer, vol. 3(2), pages 187-206, June.
    7. Balbus, Łukasz & Reffett, Kevin & Woźny, Łukasz, 2014. "A constructive study of Markov equilibria in stochastic games with strategic complementarities," Journal of Economic Theory, Elsevier, Elsevier, vol. 150(C), pages 815-840.

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