Title

Discounted Stochastic Games with Voluntary Transfers

Authors

Sebastian Kranz

Document Type

Discussion Paper

Publication Date

1-1-2012

CFDP Number

1847

CFDP Pages

32

Abstract

This paper studies discounted stochastic games perfect or imperfect public monitoring and the opportunity to conduct voluntary monetary transfers. We show that for all discount factors every public perfect equilibrium payoff can be implemented with a simple class of equilibria that have a stationary structure on the equilibrium path and optimal penal codes with a stick and carrot structure. We develop algorithms that exactly compute or approximate the set of equilibrium payoffs and find simple equilibria that implement these payoffs.

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