Subgame-perfect equilibria of finite- and infinite-horizon games |
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Authors: | Drew Fudenberg David Levine |
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Affiliation: | Department of Economics, U. C. Berkeley, Berkeley, California 94720 USA;Department of Economics, U.C.L.A., Los Angeles, California 90024 USA |
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Abstract: | We show that subgame-perfect equilibria of infinite-horizon games arise as limits, as the horizon grows long and epsilon small, of subgame-perfect epsilon-equilibria of games which are truncated after a finite horizon. A number of applications show that this result provides a useful technique for analyzing the existence and uniqueness of infinite-horizon equilibria. We extend our result to the sequential equilibrium concept. |
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