Title

Recursive Methods in Discounted Stochastic Games: An Algorithm for ! ! 1 and a Folk Theorem

Author(s)

Johannes Horner Johannes Horner (Yale University)

Takuo Sugaya Takuo Sugaya (Princeton University)

Satoru Takahashi Satoru Takahashi (Princeton University)

Nicolas Vieille Nicolas Vieille (HEC Paris)

Abstract

We present an algorithm to compute the set of perfect public equilibrium payoffs as the discount factor tends to one for stochastic games with observable states and public (but not necessarily perfect) monitoring when the limiting set of (long-run players?) equilibrium payoffs is independent of the initial state. This is the case, for instance, if the Markov chain induced by any Markov strategy profile is irreducible. We then provide conditions under which a folk theorem obtains: if in each state the joint distribution over the public signal and next period?s state satisfies some rank condition, every feasible payoff vector above the minmax payoff is sustained by a perfect public equilibrium with low discounting.

Creation Date

2010-09

Section URL ID

ET

Paper Number

wp005.pdf

URL

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.221.4313&rep=rep1&type=pdf

File Function

Jel

C72, C73

Keyword(s)

stochastic games

Suppress

false

Series

10