Markov Perfect Industry Dynamics With Many Firms

• 成果类型: Article
• 署名作者: Weintraub, Gabriel Y.; Benkard, C. Lanier; Van Roy, Benjamin
• 署名单位: Columbia University; Stanford University; Stanford University
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA6158
• 发表日期: 2008
• 页码: 1375-1411
• 关键词: NONCOOPERATIVE EQUILIBRIA; imperfect competition; WALRASIAN EQUILIBRIA; games; oligopoly; MODEL; collusion; LIMITS; strategies; economies

摘要

We propose an approximation method for analyzing Ericson and Pakes (1995)-style dynamic models of imperfect competition. We define a new equilibrium concept that we call oblivious equilibrium, in which each firm is assumed to make decisions based only on its own state and knowledge of the long-run average industry state, but where firms ignore current information about competitors' states. The great advantage of oblivious equilibria is that they are much easier to compute than are Markov perfect equilibria. Moreover, we show that, as the market becomes large, if the equilibrium distribution of firm states obeys a certain light-tail condition, then oblivious equilibria closely approximate Markov perfect equilibria. This theorem justifies using oblivious equilibria to analyze Markov perfect industry dynamics in Ericson and Pakes (1995)-style models with many firms.