Equilibrium Selection in Stochastic Games
METEOR Working Paper No. RM/01/019
22 Pages Posted: 12 Nov 2001
Date Written: October 23, 2001
Abstract
In this paper a selection theory for stochastic games is developed. The theory itself is based on the ideas of Harsanyi and Selten to select equilibria for games in standard form. We introduce several possible definitions for the stochastic tracing procedure, an extension of the linear tracing procedure to the class of stochastic games. We analyze the properties of these alternative definitions. We show that exactly on of the proposed extensions is consistent with the formulation of Harsany-Selten for games in standard form and captures stationary.
Keywords: Game theory, Stochastic games, Equilibrium Selection, Linear tracing procedure, correlated beliefs
JEL Classification: C72, C73
Suggested Citation: Suggested Citation
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