Stochastic Games with Hidden States, Second Version

Abstract

This paper studies infinite-horizon stochastic games in which players observe payoffs and noisy public information about a hidden state each period. Public randomization is available. We find that very generally, the feasible and individually rational payoff set is invariant to the initial prior about the state in the limit as the discount factor goes to one. We also provide a re-cursive characterization of the equilibrium payoff set and establish the folk theorem.