Author ORCID Identifier
Document Type
Article
Publication Date
6-25-2025
Abstract
We investigate the existence and structure of Markov-perfect equilibria of discrete-time dynamic games in which players are risk averse and have time preferences consistent with discounting. We establish the existence of a Markov-perfect equilibrium when each player strives to maximize the expected exponential utility of the present value of the time stream of rewards. Also, we give sufficient conditions for a Markov-perfect equilibrium to be myopic, namely to be a sequence of Nash equilibria of static games. The myopia results are applied to a dynamic oligopoly model in which firms choose prices and production quantities, encounter stochastic demand and hold inventories.
Keywords
dynamic game, risk-sensitive, discounting, Markov-perfect, equilibrium, myopic, oligopoly
Language
English
Publication Title
Annals of Operations Research
Rights
© The Author(s) 2025. This is an Open Access work distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Recommended Citation
Bhatt, M.S., Sobel, M.J. Risk-sensitive Markov-perfect equilibrium. Ann Oper Res (2025). https://doi.org/10.1007/s10479-025-06686-6
Manuscript Version
Final Publisher Version