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

Herings, P. Jean-Jacques and Peeters, Ronald, Equilibrium Selection in Stochastic Games (October 23, 2001). METEOR Working Paper No. RM/01/019, Available at SSRN: https://ssrn.com/abstract=290561 or http://dx.doi.org/10.2139/ssrn.290561

P. Jean-Jacques Herings (Contact Author)

Tilburg University ( email )

Department of Econometrics and Operations Research
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 4668797 (Phone)
5000 LE (Fax)

HOME PAGE: http://https://sites.google.com/view/jean-jacques-herings/home

Ronald Peeters

University of Otago ( email )

Department of Economics
P.O. Box 56
Dunedin, Otago 9054
New Zealand