Open AccessStochastic games with hidden states
Author(s) -
Yamamoto Yuichi
Publication year - 2019
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te3068
Subject(s) - stochastic game , mathematical economics , constructive , repeated game , folk theorem , set (abstract data type) , state (computer science) , mechanism design , computer science , sequence (biology) , invariant (physics) , mathematics , game theory , equilibrium selection , algorithm , process (computing) , biology , genetics , operating system , mathematical physics , programming language
This paper studies infinite‐horizon stochastic games in which players observe actions and noisy public information about a hidden state each period. We find a general condition under which the feasible and individually rational payoff set is invariant to the initial prior about the state when players are patient. This result ensures that players can punish or reward their opponents via continuation payoffs in a flexible way. Then we prove the folk theorem, assuming that public randomization is available. The proof is constructive and uses the idea of random blocks to design an effective punishment mechanism.