A User’s Guide to Solving Dynamic Stochastic Games Using the Homotopy Method

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Business Economics and Public Policy Papers
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computation
dynamic stochastic games
homotopy method
Markov-perfect equilibrium
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Public Affairs, Public Policy and Public Administration
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Borkovsky, Ron N
Doraszelski, Ulrich
Kryukov, Yaroslav
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This paper provides a step-by-step guide to solving dynamic stochastic games using the homotopy method. The homotopy method facilitates exploring the equilibrium correspondence in a systematic fashion; it is especially useful in games that have multiple equilibria. We discuss the theory of the homotopy method and its implementation and present two detailed examples of dynamic stochastic games that are solved using this method.

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2010-08-01
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Operations Research
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