Markov distributional equilibrium dynamics in games with complementarities and no aggregate risk

Lukasz Balbusy, Pawel Dziewulski, Kevin Reffett and Łukasz Woźny
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Lukasz Balbusy: Faculty of Mathematics, Computer Sciences and Econometrics, University of Zielona Gora
Kevin Reffett: Department of Economics, Arizona State University

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: We present a new approach for studying equilibrium dynamics in a class of stochastic games with a continuum of players with private types and strategic complementarities. We introduce a suitable equilibrium concept, called Markov Stationary Distributional Equilibrium (MSDE), prove its existence, and provide constructive methods for characterizing and comparing equilibrium distributional transitional dynamics. To analyze equilibrium transitions for the distributions of private types, we develop an appropriate dynamic (exact) law of large numbers. Finally, we show that our models can be approximated as idealized limits of games with a large (but finite) number of players. We provide numerous applications of the results including: dynamic models of growth with status concerns, social distance, and paternalistic bequest with endogenous preference for consumption.

Keywords: large games; distributional equilibria; supermodular games; comparative dynamics; non-aggregative games; law of large numbers; social interactions (search for similar items in EconPapers)
JEL-codes: C62 C72 C73 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-gth and nep-ore
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Related works:
Journal Article: Markov distributional equilibrium dynamics in games with complementarities and no aggregate risk (2022)
Working Paper: Markov distributional equilibrium dynamics in games with complementarities and no aggregate risk (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:1320

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