02280cam a22002897 4500001000700000003000500007005001700012008004100029100002400070245013000094260006600224490004200290500001900332520089200351530006101243538007201304538003601376690010101412690012601513690012501639700002401764700001801788710004201806830007701848856003801925856002701963w11900NBER20140723123604.0140723s2005 mau||||fs|||| 000 0 eng d1 aWeintraub, Gabriel.10aMarkov Perfect Industry Dynamics with Many Firmsh[electronic resource] /cGabriel Weintraub, C. Lanier Benkard, Ben Van Roy. aCambridge, Mass.bNational Bureau of Economic Researchc2005.1 aNBER working paper seriesvno. w11900 aDecember 2005.3 aWe propose an approximation method for analyzing Ericson and Pakes (1995)-style dynamic models of imperfect competition. We develop a simple algorithm for computing an ``oblivious equilibrium,'' in which each firm is assumed to make decisions based only on its own state and knowledge of the long run average industry state, but where firms ignore current information about competitors' states. We prove that, as the market becomes large, if the equilibrium distribution of firm states obeys a certain ``light-tail'' condition, then oblivious equilibria closely approximate Markov perfect equilibria. We develop bounds that can be computed to assess the accuracy of the approximation for any given applied problem. Through computational experiments, we find that the method often generates useful approximations for industries with hundreds of firms and in some cases even tens of firms. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aC63 - Computational Techniques • Simulation Modeling2Journal of Economic Literature class. 7aC73 - Stochastic and Dynamic Games • Evolutionary Games • Repeated Games2Journal of Economic Literature class. 7aL11 - Production, Pricing, and Market Structure • Size Distribution of Firms2Journal of Economic Literature class.1 aBenkard, C. Lanier.1 aVan Roy, Ben.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w11900.4 uhttp://www.nber.org/papers/w11900 uurn:doi:10.3386/w11900