Markov-Perfect Nash Equilibria in Models with a Single Capital Stock

Engelbert J. Dockner, Florian O. O. Wagener
2006 Social Science Research Network  
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
more » ... . 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. JEL classification C73, D92, Q22
doi:10.2139/ssrn.912663 fatcat:ryrktiwsx5axpdudcho5k2ptua