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Stochastic games with hidden states

Author

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  • Yamamoto, Yuichi

    (University of Pennsylvania, Department of Economics)

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 uses the idea of random blocks to design an effective punishment mechanism.

Suggested Citation

  • Yamamoto, Yuichi, 2019. "Stochastic games with hidden states," Theoretical Economics, Econometric Society, vol. 14(3), July.
    • Handle: RePEc:the:publsh:3068
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    References listed on IDEAS

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    9. 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. Abito, Jose Miguel & Chen, Cuicui, 2023. "A partial identification framework for dynamic games," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    2. Renault, Jérôme & Ziliotto, Bruno, 2020. "Hidden stochastic games and limit equilibrium payoffs," Games and Economic Behavior, Elsevier, vol. 124(C), pages 122-139.

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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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