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Dynamic game model of endogenous growth with consumption externalities

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  • Hori, Katsuhiko
  • Shibata, Akihisa

Abstract

This paper introduces consumption externalities into an endogenous growth model of common capital accumulation and characterizes balanced growth equilibria. Contrary to the standard argument in previous studies, we show that the growth rate in a feedback Nash equilibrium can be higher than that in an open-loop Nash equilibrium if agents strongly admire the consumption of others. This result is irrelevant to whether preferences exhibit "keeping up with the Joneses" or "running away from the Joneses".

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File URL: http://mpra.ub.uni-muenchen.de/49314/
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File URL: http://mpra.ub.uni-muenchen.de/49331/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49314.

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Date of creation: 29 Sep 2009
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Publication status: Published in Journal of Optimization Theory and Applications 1.145(2010): pp. 93-107
Handle: RePEc:pra:mprapa:49314

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Keywords: Differential game; Consumption externalities; Endogenous growth; Open-loop Nash equilibrium; Feedback Nash equilibrium;

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  23. Dockner, Engelbert J. & Nishimura, Kazuo, 2005. "Capital accumulation games with a non-concave production function," Journal of Economic Behavior & Organization, Elsevier, vol. 57(4), pages 408-420, August.
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