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- Title
Numerical solution of dynamic oligopoly games with capital investment.
- Authors
Vedenov, Dmitry V.; Miranda, Mario J.
- 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.
- Subjects
OLIGOPOLIES; STOCHASTIC analysis; H2 control
- Publication
Economic Theory, 2001, Vol 18, Issue 1
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/PL00004133