Groupe d’études et de recherche en analyse des décisions

G-2001-31

S-Adapted Equilibria in Games Played over Event Trees: An Overview

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This paper exposes in voluntarily simple terms the concept of S-adapted equilibrium introduced to represent and compute economic equilibria on stochastic markets. A model of the European gas market, that has been at the origin of the introduction of the concept, is recalled in this paper and the results obtained in 1987, when the contingent equilibrium has been computed for a time horizon extending until 2020, are compared with the observed trend in these markets over the last two decades. The information structure subsumed by this concept of S-adapted strategies is then analyzed, using different paradigms of dynamic games. The paper terminates with some open and intriguing questions related to the time consistency and subgame perfectness of the dynamic equilibrium thus introduced.

, 28 pages