Avoiding the Curse of Dimensionality in Dynamic Stochastic Games
Ulrich Doraszelski, Kenneth L. Judd
NBER Technical Working Paper No. 304
Continuous-time stochastic games with a finite number of states have substantial computational and conceptual advantages over the more common discrete-time model. In particular, continuous time avoids a curse of dimensionality and speeds up computations by orders of magnitude in games with more than a few state variables. The continuous-time approach opens the way to analyze more complex and realistic stochastic games than is feasible in discrete-time models.