A foundation for markov equilibria in sequential games with finite social memory

V. Bhaskar, George J. Mailath, Stephen Morris

Research output: Contribution to journalArticle

17 Scopus citations

Abstract

We study stochastic games with an infinite horizon and sequential moves played by an arbitrary number of players. We assume that social memory is finite-every player, except possibly one, is finitely lived and cannot observe events that are sufficiently far backin the past. This classof games includes games between a long-run player and a sequence of short-run players, and games with overlapping generations of players. An equilibrium is purifiable if some close-by behaviour is consistent with equilibrium when agents' payoffs in each period are perturbed additively and independently. We show that only Markov equilibria are purifiable when social memory is finite. Thus if a game has at most one long-run player, all purifiable equilibria are Markov.

Original languageEnglish (US)
Pages (from-to)925-948
Number of pages24
JournalReview of Economic Studies
Volume80
Issue number3
DOIs
StatePublished - Jul 1 2013

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Bounded recall
  • Markov
  • Purification
  • Sequential games

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