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

Ulrich Doraszelski and Juan F. Escobar

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.

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Year of publication:	September 2010
Authors:	Doraszelski, Ulrich ; Escobar, Juan
Published in:	Theoretical economics : TE ; an open access journal in economic theory. - Toronto : [Verlag nicht ermittelbar], ISSN 1555-7561, ZDB-ID 2220447-7. - Vol. 5.2010, 3, p. 369-402
Subject:	Dynamic stochastic games \| Markov perfect equilibrium \| regularity \| genericity \| finiteness \| strong stability \| essentiality \| purifiability \| estimation \| computation \| repeated games \| Stochastisches Spiel \| Stochastic game \| Markov-Kette \| Markov chain \| Dynamisches Spiel \| Dynamic game \| Stabilität eines Gleichgewichts \| Stability of equilibrium \| Gleichgewichtstheorie \| Equilibrium theory \| Wiederholte Spiele \| Repeated games