Finding all pure-strategy equilibria in games with continuous strategies

Judd, Kenneth and Renner, Philipp and Schmedders, Karl (2012) Finding all pure-strategy equilibria in games with continuous strategies. Quantitative Economics, 3 (2). pp. 289-331. ISSN 1759-7323

Abstract

Static and dynamic games are important tools for the analysis of strategic interactions among economic agents and have found many applications in economics. In many games, equilibria can be described as solutions of polynomial equations. In this paper, we describe state-of-the-art techniques for finding all solutions of polynomial systems of equations, and illustrate these techniques by computing all equilibria of both static and dynamic games with continuous strategies. We compute the equilibrium manifold for a Bertrand pricing game in which the number of equilibria changes with the market size. Moreover, we apply these techniques to two stochastic dynamic games of industry competition and check for equilibrium uniqueness.