A Theory of Regular Markov Perfect Equilibria in Dynamic Stochastic Games: Genericity, Stability, and Purification

By Ulrich Doraszelski, Juan F. Escobar. 2008

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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.

Subfields: Economics and Econometrics, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/6c87c6ea79195716746d0247aeb2ce543e5949a4