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Markov Perfect Equilibrium
A Markov perfect equilibrium is an equilibrium concept in game theory. It has been used in analyses of industrial organization, macroeconomics, and political economy. It is a refinement of the concept of subgame perfect equilibrium to extensive form games for which a pay-off relevant state space can be identified. The term appeared in publications starting about 1988 in the work of economists Jean Tirole and Eric Maskin. Definition In extensive form games, and specifically in stochastic games, a Markov perfect equilibrium is a set of mixed strategies for each of the players which satisfy the following criteria: * The strategies have the Markov property of memorylessness, meaning that each player's mixed strategy can be conditioned only on the ''state'' of the game. These strategies are called ''Markov reaction functions''. * The ''state'' can only encode payoff-relevant information. This rules out strategies that depend on non-substantive moves by the opponent. It exclud ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Subgame Perfect Equilibrium
In game theory, a subgame perfect equilibrium (or subgame perfect Nash equilibrium) is a refinement of a Nash equilibrium used in dynamic games. A strategy profile is a subgame perfect equilibrium if it represents a Nash equilibrium of every subgame of the original game. Informally, this means that at any point in the game, the players' behavior from that point onward should represent a Nash equilibrium of the continuation game (i.e. of the subgame), no matter what happened before. Every finite extensive game with perfect recall has a subgame perfect equilibrium. Perfect recall is a term introduced by Harold W. Kuhn in 1953 and ''"equivalent to the assertion that each player is allowed by the rules of the game to remember everything he knew at previous moves and all of his choices at those moves"''. A common method for determining subgame perfect equilibria in the case of a finite game is backward induction. Here one first considers the last actions of the game and determ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
