Markov Perfect Equilibrium: I. Observable Actions
Journal of Economic Theory, 100 (2):
191--219 (October 2001)DOI: 10.1006/jeth.2000.2785
Abstract
We define Markov strategy and Markov perfect equilibrium (MPE) for
games with observable actions. Informally, a Markov strategy depends
only on payoff-relevant past events. More precisely, it is measurable
with respect to the coarsest partition of histories for which, if
all other players use measurable strategies, each player's decision-problem
is also measurable. For many games, this definition is equivalent
to a simple affine invariance condition. We also show that an MPE
is generically robust: if payoffs of a generic game are perturbed,
there exists an almost Markovian equilibrium in the perturbed game
near the initial MPE. Journal of Economic Literature Classification
Numbers: C72, C73.
