DISCRETE TIME DYNAMIC GAMES WITH CONTINUUM OF PLAYERS II: SEMI-DECOMPOSABLE GAMES

Agnieszka Wiszniewska-Matyszkiel

International Game Theory Review (IGTR), 2003, vol. 05, issue 01, 27-40

Abstract: In this paper we consider dynamic games with continuum of players which can constitute a framework to model large financial markets. They are called semi-decomposable games.In semi-decomposable games the system changes in response to a (possibly distorted) aggregate of players' decisions and the payoff is a sum of discounted semi-instantaneous payoffs. The purpose of this paper is to present some simple properties and applications of these games. The main result is an equivalence between dynamic equilibria and families of static equilibria in the corresponding static perfect-foresight games, as well as between dynamic and static best response sets. The existence of a dynamic equilibrium is also proven. These results are counterintuitive since they differ from results that can be obtained in games with a finite number of players.The theoretical results are illustrated with examples describing large financial markets: markets for futures and stock exchanges.

Keywords: Dynamic game; discrete time; continuum of players; equilibrium; financial markets; 91AD10; 91A13; 91A40; 91A50; 91A80 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2003
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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DOI: 10.1142/S0219198903000866

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