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A theory of regular Markov perfect equilibria in dynamic stochastic games: genericity, stability, and purification

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  • Doraszelski, Ulrich

    (Department of Economics, Harvard University)

  • Escobar, Juan

    (Department of Industrial Engineering, University of Chile)

Abstract

This paper studies generic properties of Markov perfect equilibria in dynamic stochastic games. We show that almost all dynamic stochastic games have a finite number of locally isolated Markov perfect equilibria. These equilibria are essential and strongly stable. Moreover, they all admit purification. To establish these results, we introduce a notion of regularity for dynamic stochastic games and exploit a simple connection between normal form and dynamic stochastic games.

Suggested Citation

  • Doraszelski, Ulrich & Escobar, Juan, 2010. "A theory of regular Markov perfect equilibria in dynamic stochastic games: genericity, stability, and purification," Theoretical Economics, Econometric Society, vol. 5(3), September.
  • Handle: RePEc:the:publsh:632
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    More about this item

    Keywords

    Dynamic stochastic games; Markov perfect equilibrium; regularity; genericity; finiteness; strong stability; essentiality; purifiability; estimation; computation; repeated games;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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