A Folk Theorem for Stochastic Games

Abstract

In many dynamic economic applications, the appropriate game theoretic structure is that of a stochastic game. A folk theorem for such games is presented. The result subsumes a number of results obtained earlier and applies to a wide range of games studied in the economics literature. The result further establishes an underlying unity between stochastic and purely repeated games from the point of view of aspymptotic analysis, even though stochastic games offer a much richer set of deviation possibilities. Journal of Economic Literature Classification Number: C73, D90.