Implementing the Nash Program in Stochastic Games

35 Pages Posted: 20 Jul 2013

See all articles by Dilip Abreu

Dilip Abreu

Princeton University - Department of Economics

David Pearce

New York University (NYU) - Department of Economics

Date Written: June 23, 2013

Abstract

Nash' noncooperative and cooperative foundations for "bargaining with threats" are reinterpreted to achieve equilibrium selection in infinitely repeated two player games. The analysis is then extended to stochastic games, where players' choices affect the state transition matrix. Sufficient conditions on the exogenous structure of the game are provided that ensure a unique division of surplus in the stochastic game, supported by both an axiomatic and a noncooperative analysis. Some comparative dynamics results for simple classes of games illustrate the dynamic programming principles governing how bargaining power in a subgame is transferred to the preceding period, and affects behavior in that earlier period. An example illustrates the surprising potential for a bargainer to extort resources from an apparently stronger competitor.

Suggested Citation

Abreu, Dilip and Pearce, David, Implementing the Nash Program in Stochastic Games (June 23, 2013). Economic Theory Center Working Paper No. 053-2013, Available at SSRN: https://ssrn.com/abstract=2295477

Dilip Abreu (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

David Pearce

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
103
Abstract Views
725
Rank
469,855
PlumX Metrics