Markov Perfect Equilibrium

We define Markov strategy and Markov perfect equilibrium (MPE) for games with observable actions. Informally, a Markov strategy depends only on payoffrelevant past events. More precisely, it is measurable with respect to the coarsest partition of histories for which, if all other players use measurable strategies, each player's decision-problem is also measurable. For many games, this definition is equivalent to a simple affine invariance condition. We also show that an MPE is generically robust: if payoffs of a generic game are perturbed, there exists an almost Markovian equilibrium in the perturbed game near the initial MPE. Journal of Economic Literature Classification Numbers: C72, C73. 2001 Academic Press