Pareto optimality of non-cooperative equilibrium in a time-dependent multi-period game

This paper deals with the conditions under which cooperation could be advantageous to the various players in a linear-quadratic dynamic game. The conclusions, which are arrived at by comparing the non-cooperative Nash equilibrium with the set of Pareto optimal strategies, point to the presence of strong incentives for cooperation. The analysis is applicable to problems of interdependent decision-making in international or interregional economics, thereby stressing the importance of suitable coordination schemes.