Ergodic Equilibria in Stochastic Sequential Games.

Working paper

This paper characterizes, and provides existence conditions for, geometrically ergodic and stationary Markov equilibria in a type of stochastic sequential game where players have two available actions, increasing or (weakly) decreasing the integer state. For example, offering goods for sale at a market increases market-wide stock; buying decreases that stock. Similarly, joining a queue lengthens it, unlike balking. Stationarity allows us to derive the invariant strategy of players ignorant of the state, without the need for dynamic programming. Applications of this result include a microfoundation for market-clearing price adjustment.

Authors: Large, J; Norman, T

• Publisher: Oxford-Man Institute of Quantitative Finance
• Series: Working Papers
• Publication date: 2009-01-01
• Language: English