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Numerical solution of dynamic oligopoly games with capital investment

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  • Dmitry V. Vedenov

    ()
    (Department of AED Economics, 2120 Fyffe Rd., The Ohio State University, Columbus, OH 43210, USA)

  • Mario J. Miranda

    ()
    (Department of AED Economics, 2120 Fyffe Rd., The Ohio State University, Columbus, OH 43210, USA)

Abstract

This paper discusses how numerical techniques may be used to solve the simultaneous functional equations that arise in general dynamic stochastic games. Unlike the conventional linear-quadratic approach, our methods may be used to address general model specifications that may include non-quadratic objective functions, non-linear equations of motion, and constraints on decision variables. As an illustration, we apply our methods to a dynamic duopoly game in which competing firms play short-run quantity game subject to production cost that can be lowered through investment in capital stock in the long run.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 18 (2001)
Issue (Month): 1 ()
Pages: 237-261

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Handle: RePEc:spr:joecth:v:18:y:2001:i:1:p:237-261

Note: Received: June 1, 2000; revised version: December 27, 2000
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Related research

Keywords: Dynamic games - Oligopoly - Numerical methods - Computational economics.;

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Cited by:
  1. Brent, Neiman, 2011. "A state-dependent model of intermediate goods pricing," Journal of International Economics, Elsevier, vol. 85(1), pages 1-13, September.
  2. Bask, Mikael & Widerberg, Anna, 2009. "Market structure and the stability and volatility of electricity prices," Energy Economics, Elsevier, vol. 31(2), pages 278-288, March.
  3. Salvador Ortigueira, 2004. "Markovian Optimal Taxation," 2004 Meeting Papers 315, Society for Economic Dynamics.
  4. Salvador Ortigueira, 2006. "Markov-Perfect Optimal Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 153-178, January.
  5. Msangi, Siwa, 2005. "Measuring the Gains to Groundwater Management with Recursive Utility," 2005 Annual meeting, July 24-27, Providence, RI 19212, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Fabio Lamantia, 2011. "A Nonlinear Duopoly with Efficient Production-Capacity Levels," Computational Economics, Society for Computational Economics, vol. 38(3), pages 295-309, October.
  7. Thille, Henry, 2006. "Inventories, market structure, and price volatility," Journal of Economic Dynamics and Control, Elsevier, vol. 30(7), pages 1081-1104, July.
  8. Yepes Rodríguez, R., 2005. "Análisis mediante teoría de juegos de la evolución de la competencia en el sector eléctrico español/Game theoretic analysis of the evolution of competition in Spanish power sector," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 23, pages 335-362, Agosto.
  9. Jean-Paul Chavas, 2008. "On Storage Behavior Under Imperfect Competition, with Application to the American Cheese Market," Review of Industrial Organization, Springer, vol. 33(4), pages 325-339, December.

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