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Two Differential Games Between Rent-Seeking Politicians and Capitalists: Implications for Economic Growth

Author

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  • Darong Dai

    (Institute for Advanced Research (IAR), Shanghai University of Finance and Economics, No. 777, Guoding Road, Shanghai 200433, P. R. China)

  • Wenzheng Gao

    (��School of Economics, Nankai University, Tianjin 300071, P. R. China)

  • Guoqiang Tian

    (��Department of Economics, Texas A&M University, College Station, TX 77843, USA)

Abstract

We comparatively study two differential games between politicians and capitalists in terms of reducing rent-seeking distortions and stimulating economic growth. These two games imply two relationships — top-down authority and rational cooperation — between politicians and capitalists. In the current context, we prove that cooperation leads to faster growth than does authority, and simultaneously satisfies individual rationality, group rationality, Pareto efficiency and sub-game consistency. We thus show that setting a bargaining table between capitalists and politicians may create desirable incentives for reducing rent-seeking distortions, developing the spirit of capitalism and stimulating economic growth.

Suggested Citation

  • Darong Dai & Wenzheng Gao & Guoqiang Tian, 2019. "Two Differential Games Between Rent-Seeking Politicians and Capitalists: Implications for Economic Growth," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-30, September.
  • Handle: RePEc:wsi:igtrxx:v:21:y:2019:i:03:n:s0219198918500111
    DOI: 10.1142/S0219198918500111
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    Cited by:

    1. Dai, Darong & Tian, Guoqiang, 2021. "Toward longer investment: Is an inclusive regime always better than an authoritarian one?," Economic Modelling, Elsevier, vol. 98(C), pages 41-68.

    More about this item

    Keywords

    Rent-seeking politicians; stochastic differential game; capital income tax; endogenous growth;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P50 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - General

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