Discussion paper

DP7323 Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work

With applied work in mind, we define an equilibrium notion for dynamic games with asymmetric information which does not require a specification for players' beliefs about their opponent types. This enables us to define equilibrium conditions which, at least in principal, are testable and can be computed using a simple reinforcement learning algorithm. We conclude with an example that endogenizes the maintenance decisions for electricity generators in a dynamic game among electric utilities in which the costs states of the generators are private information.

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Citation

Fershtman, C and A Pakes (2009), ‘DP7323 Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work‘, CEPR Discussion Paper No. 7323. CEPR Press, Paris & London. https://cepr.org/publications/dp7323