Markov perfect equilibria in industries with complementarities

Christopher Sleet ()
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Christopher Sleet: Department of Economics, University of Texas, Austin, TX 78712, USA

Economic Theory, 2001, vol. 17, issue 2, 397 pages

Abstract: This paper considers the existence and computation of Markov perfect equilibria in games with a "monotone" structure. Specifically, it provides a constructive proof of the existence of Markov perfect equilibria for a class of games in which a) there is a continuum of players, b) each player has the same per period payoff function and c) these per period payoff functions are supermodular in the player's current and past action and have increasing differences in the player's current action and the entire distribution of actions chosen by other players. The Markov perfect equilibria that are analyzed are symmetric, not in the sense that each player adopts the same action in any period, but rather in the sense that each player uses the same policy function. Since agents are typically distributed across many states they will typically take different actions. The formal environment considered has particular application to models of industries (or economies) in which firms face costs of price adjustment. It is in this context that the results are developed.

Keywords: Markov perfect equilibrium; Complementarities; Industry equilibrium. (search for similar items in EconPapers)
JEL-codes: C73 D92 (search for similar items in EconPapers)
Date: 2000-11-14
Note: Received: November 9, 1999; revised version: February 10, 2000
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