Ergodic equilibria in stochastic sequential games
Many dynamic economic situations, including certain markets, can be fruitfully modeled as binary-action stochastic sequential games. Such games have a state variable, which in the case of a market might be the inventory of the good waiting for sale. Conditional on the state, players choose in sequ...
| Հիմնական հեղինակներ: | , |
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| Ձևաչափ: | Working paper |
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University of Oxford
2008
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| _version_ | 1826270474224533504 |
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| author | Large, J Norman, T |
| author_facet | Large, J Norman, T |
| author_sort | Large, J |
| collection | OXFORD |
| description | Many dynamic economic situations, including certain markets, can be fruitfully modeled as binary-action stochastic sequential games. Such games have a state variable, which in the case of a market might be the inventory of the good waiting for sale. Conditional on the state, players choose in sequence whether to subtract from it (buy) or add to it (sell). Under two assmptions - called Self-Regulation and Separable Preferences - we can derive the existence of a stationary, sequential equilibrium where the state is geometrically ergodic and stationary, and the two actions are played in the ratio required to avoid drift. We solve for the equilibrium strategies of a particular class of uninformed player. In equilibrium, players must solve a potentially complicated forecasting problem, but our analysis used stationarity to bypass the details of this problem, thus avoiding the (often intractable) dynamic programming usually required to solve stochastic games. This simplification allows us to develop powerful invariance and welfare results, and to provide a microfoundation for market-clearing price adjustment. |
| first_indexed | 2024-03-06T21:41:24Z |
| format | Working paper |
| id | oxford-uuid:480fd27d-36fc-4751-890c-813a0ae1e2d1 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T21:41:24Z |
| publishDate | 2008 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:480fd27d-36fc-4751-890c-813a0ae1e2d12022-03-26T15:23:27ZErgodic equilibria in stochastic sequential gamesWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:480fd27d-36fc-4751-890c-813a0ae1e2d1Bulk import via SwordSymplectic ElementsUniversity of Oxford2008Large, JNorman, TMany dynamic economic situations, including certain markets, can be fruitfully modeled as binary-action stochastic sequential games. Such games have a state variable, which in the case of a market might be the inventory of the good waiting for sale. Conditional on the state, players choose in sequence whether to subtract from it (buy) or add to it (sell). Under two assmptions - called Self-Regulation and Separable Preferences - we can derive the existence of a stationary, sequential equilibrium where the state is geometrically ergodic and stationary, and the two actions are played in the ratio required to avoid drift. We solve for the equilibrium strategies of a particular class of uninformed player. In equilibrium, players must solve a potentially complicated forecasting problem, but our analysis used stationarity to bypass the details of this problem, thus avoiding the (often intractable) dynamic programming usually required to solve stochastic games. This simplification allows us to develop powerful invariance and welfare results, and to provide a microfoundation for market-clearing price adjustment. |
| spellingShingle | Large, J Norman, T Ergodic equilibria in stochastic sequential games |
| title | Ergodic equilibria in stochastic sequential games |
| title_full | Ergodic equilibria in stochastic sequential games |
| title_fullStr | Ergodic equilibria in stochastic sequential games |
| title_full_unstemmed | Ergodic equilibria in stochastic sequential games |
| title_short | Ergodic equilibria in stochastic sequential games |
| title_sort | ergodic equilibria in stochastic sequential games |
| work_keys_str_mv | AT largej ergodicequilibriainstochasticsequentialgames AT normant ergodicequilibriainstochasticsequentialgames |