Existence of a Pure Strategy Equilibrium in Markov Games with Strategic Complementarities for Finite Actions and States
18 Pages Posted: 4 May 2011
Date Written: March 30, 2010
Abstract
In this paper, we provide the sufficient conditions for a Markov perfect equilibrium in pure strategies to exist for a class of stochastic games with finite horizon, in which any stage game has strategic complementarities. In contrast to previous studies (e.g., Curtat (1996) and Amir (2002), we assume herein that the sets of actions and the set of states is finite and do not assume dominant diagonal conditions for payoffs and the transition probability, which yield the uniqueness of equilibria. The greatest equilibrium is monotonically increasing in the state. The main result is applied to a model of a Bertrand competition with investment.
Keywords: Stochastic Game, Markov Perfect Equilibrium, Supermodular Game, Strategic Complementarity, Pure Strategy Equilibrium
JEL Classification: C63, C72
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Byoung Jun and Xavier Vives
-
Employment Protection and Globalisation in Dynamic Oligopoly
By Gerda Dewit, Dermot Leahy, ...
-
Employment Protection and Globalisation in Dynamic Oligopoly
By Gerda Dewit, Dermot Leahy, ...
-
Strategic Complementarities in Multi-Stage Games
By Xavier Vives
-
Multinational Investment, Industry Risk and Policy Competition
By Jan I. Haaland and Ian Wooton
-
Should I Stay or Should I Go? A Note on Employment Protection, Domestic Anchorage, and FDI
By Gerda Dewit, Holger Görg, ...
-
Fancy a Stay at the 'Hotel California'? Foreign Direct Investment, Taxation and Firing Costs
By Holger Görg