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 language | English (US) |
|---|---|
| Pages (from-to) | 191-219 |
| Number of pages | 29 |
| Journal | Journal of Economic Theory |
| Volume | 100 |
| Issue number | 2 |
| DOIs | |
| State | Published - 2001 |
Funding
Research support from the National Science Foundation and the Taussig Visiting Professorship at Harvard University and able research assistance by Daniel Chen, Thomas Mariotti, E. Somanathan, and Steve Tadelis are gratefully acknowledged. Joint work and discussions with Drew Fudenberg helped give shape to the ideas developed here. The technical advice of Andreu Mas-Colell was invaluable. We also thank David Easley, Martin Hellwig, Edi Karni, Sylvain Sorin, and Geoffrey Tate for helpful comments.
Keywords
- Dynamic games
- Markov perfect equilibrium
- Payoff-relevant histories
- Robustness
- Simple strategies
ASJC Scopus subject areas
- Economics and Econometrics