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Subgame-Perfect Equilibria of Finite- and Infinite-Horizon Games

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  • Drew Fudenberg
  • David K. Levine

Abstract

AbstractWe show that subgame-perfect equilibria of infinite-horizon games arise as limits, as the horizon grows long and epsilon small, of subgame-perfect epsilon-equilibria of games which are truncated after a finite horizon. A number of applications show that this result provides a useful technique for analyzing the existence and uniqueness of infinite-horizon equilibria. We extend our result to the sequential equilibrium concept.
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Suggested Citation

  • Drew Fudenberg & David K. Levine, 1983. "Subgame-Perfect Equilibria of Finite- and Infinite-Horizon Games," Levine's Working Paper Archive 219, David K. Levine.
  • Handle: RePEc:cla:levarc:219
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    References listed on IDEAS

    as
    1. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-894, July.
    2. David Levine, 1982. "Enforcement of Collusion in Oligopoly," UCLA Economics Working Papers 247, UCLA Department of Economics.
    3. Rubinstein, Ariel, 1979. "Equilibrium in supergames with the overtaking criterion," Journal of Economic Theory, Elsevier, vol. 21(1), pages 1-9, August.
    4. Drew Fudenberg & David Levine, 1981. "Perfect Equilibria of Finite and Infinite Horizon Games," UCLA Economics Working Papers 216, UCLA Department of Economics.
    5. Reinhard Selten, 1974. "Reexamination of the Perfectness Concept for Equilibrium Points in Extensive Games," Center for Mathematical Economics Working Papers 023, Center for Mathematical Economics, Bielefeld University.
    6. Fudenberg, Drew & Tirole, Jean, 1983. "Capital as a commitment: Strategic investment to deter mobility," Journal of Economic Theory, Elsevier, vol. 31(2), pages 227-250, December.
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    • I10 - Health, Education, and Welfare - - Health - - - General

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