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Title: A User's Guide to Solving Dynamic Stochastic Games Using the Homotopy Method

Author(s): Ron N. Borkovsky, Ulrich Doraszelski and Yaroslav Kryukov

Publication Date: March 2008

Keyword(s): computation, dynamic stochastic games, homotopy method and Markov-perfect equilibrium

Programme Area(s): Industrial Organization

Abstract: This paper provides a step-by-step guide to solving dynamic stochastic games using the homotopy method. The homotopy method facilitates exploring the equilibrium correspondence in a systematic fashion; it is especially useful in games that have multiple equilibria. We discuss the theory of the homotopy method and its implementation and present two detailed examples of dynamic stochastic games that are solved using this method.

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Bibliographic Reference

Borkovsky, R, Doraszelski, U and Kryukov, Y. 2008. 'A User's Guide to Solving Dynamic Stochastic Games Using the Homotopy Method'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6733