Numerical solution of dynamic oligopoly games with capital investment |
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Authors: | Dmitry V Vedenov Mario J Miranda |
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Institution: | (1) Department of AED Economics, 2120 Fyffe Rd., The Ohio State University, Columbus, OH 43210, USA (e-mail: vedenov.2@osu.edu and miranda.4@osu.edu) , US |
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Abstract: | Summary. 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.
Received: June 1, 2000; revised version: December 27, 2000 |
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Keywords: | and Phrases: Dynamic games – Oligopoly – Numerical methods – Computational economics |
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