Sustainable Exploitation Equilibria for Dynamic Games

We introduce the Sustainable Exploitation Equilibrium (SEE), a refinement of Markov Perfect Equilibrium (MPE) for dynamic games with an exploiter-exploitee structure. SEE imposes renegotiation-proof exploiter-optimal selection on the set of rationally viable stationary Markov equilibria, where viability follows from sequential rationality when exiting a sustainability set entails catastrophic losses. Unlike MPE, SEE rules out equilibria in which the exploiter optimally drives the state to collapse despite positive continuation payoffs. The exploitee cannot exit, but retains a strategic effort margin affecting dynamics and payoffs. We establish existence under standard conditions, and the refinement is illustrated in a hegemon-client model of foreign politics.