Markov Perfect Equilibria in Repeated Asynchronous Choice Games

Report No: GU WP #97-10

25 Pages Posted: 12 Mar 1998

See all articles by Roger Lagunoff

Roger Lagunoff

Georgetown University - Department of Economics

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics

Abstract

This paper examines the issue of multiplicity of equilibria in alternating move repeated games with two players. Such games are canonical models of environments with repeated, asynchronous choices due to inertia or replacement. We focus our attention on Markov Perfect equilibria (MPE). These are Perfect equilibria in which individuals condition their actions on payoff-relevant state variables. Our main result is that the number of Markov Perfect equilibria is generically finite with respect to stage game payoffs. This holds despite the fact that the stochastic game representation of the alternating move repeated game is "non-generic" in the larger space of state dependent payoffs. We also compare the MPE to non-Markovian equilibria and to the (trivial) MPE of standard repeated games. Unlike the latter, it is often true when moves are asynchronous that Pareto inferior stage game equilibrium payoffs cannot be supported in MPE. Also, MPE can be constructed to support cooperation in a Prisoner's Dilemma despite limited possibilities for constructing punishments.

JEL Classification: C72, C73

Suggested Citation

Lagunoff, Roger and Haller, Hans H., Markov Perfect Equilibria in Repeated Asynchronous Choice Games. Report No: GU WP #97-10, Available at SSRN: https://ssrn.com/abstract=66533 or http://dx.doi.org/10.2139/ssrn.66533

Roger Lagunoff (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-1510 (Phone)
202-687-6102 (Fax)

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-7591 (Phone)
540-231-5097 (Fax)

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