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Stability of linear stochastic difference equations in controlled random environments


  • Horst, Ulrich


We consider the stochastic sequence {Yi}t E N defined recursively by the linear relation Yt+l = AtYt + Bt in a random environment. The environment is described by the stochastic process {(At, Bt ) }t E N and is under the simultaneous control of several agents playing a discounted stochastic game. We formulate sufficient conditions on the game which ensure the existence of Nash equilibrium in Markov strategies which has the additional property that, in equilibrium, the process {Yt} t E N converges in distribution to a unique stationary sequence.

Suggested Citation

  • Horst, Ulrich, 2002. "Stability of linear stochastic difference equations in controlled random environments," SFB 373 Discussion Papers 2002,74, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  • Handle: RePEc:zbw:sfb373:200274

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