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.
Noisy Stochastic Games
Article first published online: 25 SEP 2012
© 2012 The Econometric Society
Volume 80, Issue 5, pages 2017–2045, September 2012
How to Cite
Duggan, J. (2012), Noisy Stochastic Games. Econometrica, 80: 2017–2045. doi: 10.3982/ECTA10125
- Issue published online: 25 SEP 2012
- Article first published online: 25 SEP 2012
- Manuscript received June, 2011; final revision received February, 2012.
- Stochastic game;
- dynamic game;
- stationary Markov perfect equilibrium;
- equilibrium existence;
- industry dynamics;
- dynamic elections
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.