Weintraub, Gabriel Y.
[Verfasser:in]
;
Benkard, C. Lanier
[Sonstige Person, Familie und Körperschaft];
Van Roy, Benjamin
[Sonstige Person, Familie und Körperschaft]
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 2007 erstellt
Beschreibung:
We propose an approximation method for analyzing Ericson and Pakes (1995)-style dynamic models of imperfect competition. We define a new equilibrium concept that we call quot;oblivious equilibrium,quot; in which each firm is assumed to make decisions based only on its own state and knowledge of the long run average industry state, but where firms ignore current information about competitors' states. The great advantage of oblivious equilibria is that they are much easier to compute than are Markov perfect equilibria. Moreover, we show that, as the market becomes large, if the equilibrium distribution of firm states obeys a certain quot;light-tailquot; condition, then oblivious equilibria closely approximate Markov perfect equilibria. This theorem justifies using oblivious equilibria to analyze Markov perfect industry dynamics in Ericson and Pakes (1995)-style models with many firms