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Stability of linear stochastic difference equations in controlled random environments

Ulrich Horst

No 2002,74, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Abstract: We consider the stochastic sequence {Yi}t E N defined recursively by the linear relation Yt+l = AtYt + Bt in a random environment. The environment is described by the stochastic process {(At, Bt ) }t E N and is under the simultaneous control of several agents playing a discounted stochastic game. We formulate sufficient conditions on the game which ensure the existence of Nash equilibrium in Markov strategies which has the additional property that, in equilibrium, the process {Yt} t E N converges in distribution to a unique stationary sequence.

Keywords: Stochastic difference equation; stochastic stability; stochastic games; random systems with complete connections (search for similar items in EconPapers)
Date: 2002
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