MARKOV PERFECT EQUILIBRIUM IN MULTI-PERIOD GAMES BETWEEN SPONSOR AND BUREAU
In: Public choice, Band 79, Heft 3,4, S. 257-280
ISSN: 0048-5829
THE AUTHORS FORMULATE A SIMPLE MODEL OF THE INTERACTION BETWEEN A SPONSOR AND A BUREAU. THE SPONSOR SETS THE BUREAU'S BUDGET WHILE THE BUREAU DECIDES ON HOW MUCH TO SPEND ON SLACK. THE AUTHORS COMPUTE NUMERICALLY MARKOV PERFECT EQUILIBRIA OF MULTI-PERIOD GAMES WHERE THE AGENTS MOVE ALTERNATELY AND APPLY MARKOV STRATEGIES. BOTH AGENTS ARE WORSE OFF COMPARED TO THE ONE-PERIOD GAME WITH SIMULTANEOUS MOVES. AS THE DISCOUNT FACTORS INCREASE, THE EQUILIBRIUM OUTCOME BECOMES LESS COOPERATIVE IN NATURE.