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Discounted Stochastic Games With Voluntary Transfers, Sebastian Kranz
Discounted Stochastic Games With Voluntary Transfers, Sebastian Kranz
Cowles Foundation Discussion Papers
This paper studies discounted stochastic games perfect or imperfect public monitoring and the opportunity to conduct voluntary monetary transfers. We show that for all discount factors every public perfect equilibrium payoff can be implemented with a simple class of equilibria that have a stationary structure on the equilibrium path and optimal penal codes with a stick and carrot structure. We develop algorithms that exactly compute or approximate the set of equilibrium payoffs and find simple equilibria that implement these payoffs.
Decomposable Choice Under Uncertainty, Simon Grant, Atsushi Kajii, Ben Polak
Decomposable Choice Under Uncertainty, Simon Grant, Atsushi Kajii, Ben Polak
Cowles Foundation Discussion Papers
Savage motivated his Sure Thing Principle by arguing that, whenever an act would be preferred if an event obtains and preferred if that event did not obtain, then it should be preferred overall. The idea that it should be possible to decompose and recompose decision problems in this way has normative appeal. We show, however, that it does not require the full separability across events implicit in Savage’s axiom. We formulate a weaker axiom that suffices for decomposability, and show that this implies an implicit additive representation. Our decomposability property makes local necessary conditions for optimality, globally sufficient. Thus, it …