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Dynamic games with hidden actions and hidden states

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  • Harold L. Cole
  • Narayana R. Kocherlakota

Abstract

We consider a class of dynamic games in which each player?s actions are unobservable to the other players and each player?s actions can influence a state variable that is unobservable to the other players. We develop an algorithm that solves for the subset of sequential equilibria in which equilibrium strategies depend on private information only through the privately observed state.

Suggested Citation

  • Harold L. Cole & Narayana R. Kocherlakota, 1998. "Dynamic games with hidden actions and hidden states," Staff Report 254, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:254
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    References listed on IDEAS

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    Cited by:

    1. Doepke, Matthias & Townsend, Robert M., 2006. "Dynamic mechanism design with hidden income and hidden actions," Journal of Economic Theory, Elsevier, vol. 126(1), pages 235-285, January.
    2. Susan Athey & Kyle Bagwell, 2008. "Collusion With Persistent Cost Shocks," Econometrica, Econometric Society, vol. 76(3), pages 493-540, May.
    3. Sperisen, Benjamin, 2018. "Bounded memory and incomplete information," Games and Economic Behavior, Elsevier, vol. 109(C), pages 382-400.
    4. Doval, Laura & Skreta, Vasiliki, 2024. "Optimal mechanism for the sale of a durable good," Theoretical Economics, Econometric Society, vol. 19(2), May.
    5. Fershtman, Chaim & Pakes, Ariel, 2005. "Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work," CEPR Discussion Papers 5024, C.E.P.R. Discussion Papers.
    6. Aurélien Delage & Olivier Buffet & Jilles S. Dibangoye & Abdallah Saffidine, 2024. "HSVI Can Solve Zero-Sum Partially Observable Stochastic Games," Dynamic Games and Applications, Springer, vol. 14(4), pages 751-805, September.
    7. Fernandes, Ana & Phelan, Christopher, 2000. "A Recursive Formulation for Repeated Agency with History Dependence," Journal of Economic Theory, Elsevier, vol. 91(2), pages 223-247, April.
    8. Abraham Arpad & Nicola Pavoni, 2004. "Efficient Allocations, with Moral Hazard and Hidden Borrowing and Lending," Levine's Bibliography 122247000000000138, UCLA Department of Economics.
    9. Łukasz Balbus & Kevin Reffett & Łukasz Woźny, 2013. "Markov Stationary Equilibria in Stochastic Supermodular Games with Imperfect Private and Public Information," Dynamic Games and Applications, Springer, vol. 3(2), pages 187-206, June.
    10. Wei He, 2022. "Discontinuous stochastic games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(4), pages 827-858, June.
    11. Kimmo Berg, 2016. "Elementary Subpaths in Discounted Stochastic Games," Dynamic Games and Applications, Springer, vol. 6(3), pages 304-323, September.
    12. Vineet M. Payyappalli & Jun Zhuang & Victor Richmond R. Jose, 2017. "Deterrence and Risk Preferences in Sequential Attacker–Defender Games with Continuous Efforts," Risk Analysis, John Wiley & Sons, vol. 37(11), pages 2229-2245, November.
    13. Johannes Hörner & Satoru Takahashi & Nicolas Vieille, 2015. "Truthful Equilibria in Dynamic Bayesian Games," Econometrica, Econometric Society, vol. 83(5), pages 1795-1848, September.
    14. Doraszelski, Ulrich & Escobar, Juan F., 2012. "Restricted feedback in long term relationships," Journal of Economic Theory, Elsevier, vol. 147(1), pages 142-161.
    15. Hao Zhang, 2012. "Solving an Infinite Horizon Adverse Selection Model Through Finite Policy Graphs," Operations Research, INFORMS, vol. 60(4), pages 850-864, August.
    16. Mitri Kitti, 2013. "Conditional Markov equilibria in discounted dynamic games," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 78(1), pages 77-100, August.
    17. Hao Zhang & Stefanos Zenios, 2008. "A Dynamic Principal-Agent Model with Hidden Information: Sequential Optimality Through Truthful State Revelation," Operations Research, INFORMS, vol. 56(3), pages 681-696, June.
    18. Zhuang, Jun & Bier, Vicki M. & Alagoz, Oguzhan, 2010. "Modeling secrecy and deception in a multiple-period attacker-defender signaling game," European Journal of Operational Research, Elsevier, vol. 203(2), pages 409-418, June.
    19. Arpad Abraham & Nicola Pavoni, 2008. "Efficient Allocations with Moral Hazard and Hidden Borrowing and Lending: A Recursive Formulation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 781-803, October.
    20. Hao Zhang, 2012. "Analysis of a Dynamic Adverse Selection Model with Asymptotic Efficiency," Mathematics of Operations Research, INFORMS, vol. 37(3), pages 450-474, August.

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