Homotopy methods to compute equilibria in game theory

Abstract

This paper presents a survey of the use of homotopy methods in game theory. Homotopies allow for a robust computation of game-theoretic equilibria and their refinements. Homotopies are also suitable to compute equilibria that are selected by various selection theories. We present the relevant techniques underlying homotopy algorithms. We give detailed expositions of the Lemke–Howson algorithm and the van den Elzen–Talman algorithm to compute Nash equilibria in 2-person games, and the Herings–van den Elzen, Herings–Peeters, and McKelvey–Palfrey algorithms to compute Nash equilibria in general n-person games. We explain how the main ideas can be extended to compute equilibria in extensive form and dynamic games, and how homotopies can be used to compute all Nash equilibria.

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Correspondence to P. Jean-Jacques Herings.

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P. J. J. Herings and R. Peeters are financially supported by The Netherlands Organisation for Scientific Research.

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Herings, P.JJ., Peeters, R. Homotopy methods to compute equilibria in game theory. Econ Theory 42, 119–156 (2010). https://doi.org/10.1007/s00199-009-0441-5

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Keywords

  • Homotopy
  • Equilibrium computation
  • Non-cooperative games
  • Nash equilibrium

JEL Classification

  • C62
  • C63
  • C72
  • C73