Noisy Stochastic Games

This paper establishes existence of a stationary Markov perfect equilib-rium in general stochastic games with noise — a component of the state that is nonatomically distributed and not directly affected by the previous period’s state and actions. Noise may be simply a payoff irrelevant public randomization device, delivering known results on existence of correlated equilibrium as a special case. More generally, noise can take the form of shocks that enter into players ’ stage payoffs and the transition probability on states. The existence result is applied to a model of industry dynamics and to a model of dynamic partisan electoral competition.