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Protocol Invariance and the Timing of Decisions in Dynamic Games

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  • Doraszelski, Ulrich
  • Escobar, Juan

Abstract

The timing of decisions is an essential ingredient in modelling any strategic situation. Yet, determining the most realistic and appropriate protocol of moves can be challenging. We introduce a class of dynamic stochastic games that we call separable dynamic games with noisy transitions and establish that they are protocol invariant provided that periods are sufficiently short. Protocol invariance means that the set of Markov perfect equilibria is nearly the same irrespective of the order in which players are assumed to move within a period. We also show that the equilibria have a remarkably simple structure.

Suggested Citation

  • Doraszelski, Ulrich & Escobar, Juan, 2016. "Protocol Invariance and the Timing of Decisions in Dynamic Games," CEPR Discussion Papers 11447, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11447
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    More about this item

    Keywords

    Dynamic games; Markov perfect equilibrium; Protocol of moves;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D0 - Microeconomics - - General

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