Oblivious Equilibrium in Dynamic Discrete Games

Joao Macieira
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Joao Macieira: Virginia Tech

No 680, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: The recently introduced concept of oblivious equilibrium aims at approximating Markov-Perfect Nash Equilibria (MPNE) when its calculation is computationally prohibitive in Ericson-Pakes-style games with many players. This paper extends the oblivious equilibrium concept to dynamic discrete-choice games. In contrast to Ericson-Pakes models, we find that there is a unique oblivious under independence of state transitions across players. We demonstrate that the distance between this equilibrium and any MPNE converges in probability to zero as the number of game players goes to infinity. Unlike previous work, our convergence result requires neither a "light tail" condition nor the absence of aggregate states in the dynamic game.

Date: 2010
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