Working Paper: CEPR ID: DP6805
Authors: Ulrich Doraszelski; Juan Escobar
Abstract: This paper develops a theory of regular 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 that are all regular. These equilibria are essential and strongly stable. Moreover, they all admit purification.
Keywords: Computation; Dynamic Stochastic Games; Essentiality; Estimation; Finiteness; Genericity; Markov Perfect Equilibrium; Purifiability; Regularity; Repeated Games; Strong Stability
JEL Codes: C61; C62; C73
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| dynamic stochastic games (C73) | finite number of locally isolated Markov perfect equilibria (D52) |
| finite number of locally isolated Markov perfect equilibria (D52) | regular (C29) |
| finite number of locally isolated Markov perfect equilibria (D52) | essential (Y20) |
| finite number of locally isolated Markov perfect equilibria (D52) | strongly stable (C62) |
| slight changes in payoffs (C79) | equilibrium behavior (D50) |
| equilibria (D50) | purification (Q53) |
| purification (Q53) | equilibria of nearby games with incomplete information (C73) |