Working Paper: CEPR ID: DP11447
Authors: Ulrich Doraszelski; Juan Escobar
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 ofMarkov 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.
Keywords: protocol of moves; dynamic games; Markov perfect equilibrium
JEL Codes: C73; D92
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| protocol of moves (D74) | Markov perfect equilibria (C73) |
| period length approaches zero (C41) | influence of protocol of moves on equilibrium behavior (C62) |
| flow payoffs (G19) | protocol invariance of Markov perfect equilibria (C73) |
| separability assumption (D10) | structure of Markov perfect equilibria (D43) |