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Title:Stochastic games with endogenous transitions PDF Logo
Authors:Joosten, Reinoud
Meijboom, Robin
Issue Date:2010
Series/Report no.:Papers on economics and evolution 1024
Abstract:We introduce a stochastic game in which transition probabilities depend on the history of the play, i.e., the players' past action choices. To solve this new type of game under the limiting average reward criterion, we determine the set of jointly-convergent pure-strategy rewards which can be supported by equilibria involving threats. We examine the following setting for motivational and expository purposes. Each period, two agents exploiting a fishery choose between catching with restraint or without. The fish stock is in either of two states, High or Low, and in the latter each action pair yields lower payoffs. Restraint is harmless to the fish, but it is a dominated strategy in each stage game. Absence of restraint damages the resource, i.e., the less restraint the agents show, the higher the probablities that Low occurs at the next stage of the play. This state may even become absorbing, i.e., transitions to High become impossible.
Subjects:stochastic games
endogenous transitions
limiting average rewards
equilibria
common pool resource dilemma
JEL:C72
C73
Q22
Q57
Persistent Identifier of the first edition:urn:nbn:de:gbv:27-20110630-112051-8
Document Type:Working Paper
Appears in Collections:Papers on Economics and Evolution, MPI für Ökonomik

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