Markov Quantal Response Equilibrium and a Homotopy Method for Computing and Selecting Markov Perfect Equilibria of Dynamic Stochastic Games

Steffen Eibelshäuser and David Poensgen

VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association

Abstract: We formally define Markov quantal response equilibrium (QRE) and prove existence for all finite discounted dynamic stochastic games. The special case of logit Markov QRE constitutes a mapping from precision parameter ... to sets of logit Markov QRE. The limiting points of this correspondence are shown to be Markov perfect equilibria. Furthermore, the logit Markov QRE correspondence can be given a homotopy interpretation. We prove that for all games, this homotopy contains a branch connecting the unique solution at ...to a unique limiting Markov perfect equilibrium. This result can be leveraged both for the computation of Markov perfect equilibria, and also as a selection criterion.

Keywords: Homotopy continuation; Stationary equilibrium; Logit choice (search for similar items in EconPapers)
JEL-codes: C63 C73 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-gth and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/203603/1/VfS-2019-pid-27973.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc19:203603

Access Statistics for this paper

More papers in VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().