Noisy Stochastic Games

Authors

  • John Duggan

    1. Dept. of Political Science and Dept. of Economics, University of Rochester, Rochester, NY 14627, U.S.A.; dugg@ur.rochester.edu
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    • This project has benefited from discussions with Paulo Barelli, Tasos Kalandrakis, Andrzej Nowak, Frank Page, Phil Reny, and Idione Soza. I retain responsibility for all errors.


Abstract

This paper establishes existence of a stationary Markov perfect equilibrium in general stochastic games with noise—a component of the state that is nonatomically distributed and not directly affected by the previous period's state and actions. Noise may be simply a payoff-irrelevant public randomization device, delivering known results on the existence of correlated equilibrium as a special case. More generally, noise can take the form of shocks that enter into players' stage payoffs and the transition probability on states. The existence result is applied to a model of industry dynamics and to a model of dynamic electoral competition.

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