Dynamic Games with Asymmetric Information: A Framework for Empirical Work∗

We develop a framework for the analysis of dynamic oligopolies with persistant sources of asymmetric information that enables applied analysis of situations of empirical importance that have been difficult to deal with. The framework generates policies which are “relatively” easy for agents to use while still being optimal in a meaningful sense, and is amenable to empirical research in that its equilibrium conditions can be tested and equilibrium policies are relatively ease to compute. We conclude with an example that endogenizes the maintenance decisions of electricity generators when the costs states of the generators are private information. ∗We would like to thank; two referees, the editor Elhanan Helpman, John Asker, Susan Athey, Adam Brandenburger, Eddie Dekel, Liran Einav, Drew Fudenberg, Phil Haile, Robin Lee, Greg Lewis and Michael Ostrovsky, for constructive comments, and Niyati Ahuja for superb research assistance.