Markov–Perfect Nash Equilibria in Models With a Single Capital Stock (Revised version, March 2013)
Many economic problems can be formulated as dynamic games in which strategically interacting agents choose actions that determine the current and future levels of a single capital stock. We study necessary as well as sufficient conditions that allow us to characterise Markov-perfect Nash equilibria for these games. These conditions can be translated into an auxiliary system of ordinary differential equations that helps us to explore stability, continuity and differentiability of these equilibria. The techniques are used to derive detailed properties of Markov-perfect Nash equilibria for several games including voluntary investment in a public capital stock, the inter-temporal consumption of a reproductive asset, and the pollution of a shallow lake.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands|
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