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

Author(s): Chaim Fershtman and Ariel Pakes

Publication Date: June 2009

Keyword(s): Applied Markov Equilibrium, Dynamic Games and Dynamic Oligopoly

Programme Area(s): Industrial Organization

Abstract: 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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Bibliographic Reference

Fershtman, C and Pakes, A. 2009. 'Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7323