Monday, May 2, 2011
Posted by D. Daniel Sokol
Davide Dragone (Department of Economics, University of Bologna) Luca Lambertini (ENCORE, University of Amsterdam) and Arsen Palestini (MEMOTEF, University of Roma “La Sapienza”) provide thoughts On the feedback solution of a differential oligopoly game with capacity adjustment.
ABSTRACT: We propose a simple method for characterising analytically the feedback solution of oligopoly games with capital accumulation à la Solow-Swan. As a result, it becomes possible to contrast the feedback equilibrium against the corresponding one generated by open-loop information. Our method accomodates extensions of the stripped down oligopoly model in several directions. As an example, we expand the setup to include environmental effects and Pigouvian taxation.