Markov perfect equilibrium. I. Observable actions

Eric Maskin*, Jean Tirole

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    292 Scopus citations

    Abstract

    We define Markov strategy and Markov perfect equilibrium (MPE) for games with observable actions. Informally, a Markov strategy depends only on payoff-relevant past events. More precisely, it is measurable with respect to the coarsest partition of histories for which, if all other players use measurable strategies, each player's decision-problem is also measurable. For many games, this definition is equivalent to a simple affine invariance condition. We also show that an MPE is generically robust: if payoffs of a generic game are perturbed, there exists an almost Markovian equilibrium in the perturbed game near the initial MPE. Journal of Economic Literature Classification Numbers: C72, C73.

    Original languageEnglish (US)
    Pages (from-to)191-219
    Number of pages29
    JournalJournal of Economic Theory
    Volume100
    Issue number2
    DOIs
    StatePublished - 2001

    Keywords

    • Dynamic games
    • Markov perfect equilibrium
    • Payoff-relevant histories
    • Robustness
    • Simple strategies

    ASJC Scopus subject areas

    • Economics and Econometrics

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