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On feedback nash equilibrium and cooperation in the neoclassical growth model

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  • Edgar J. Sanchez Carrera

    (Universidad Autonoma de San Luis Potosi)

Abstract

Far away from any ideological point of view, our aim in this paper is to study, in a differential-game-theoretical approach, the standard growth model. Our baseline model comes from Kaitala y Pohjola (2009) based on the original ideas of Lancaster (1973). We focus on the computation of feedback strategies and we use history-dependent strategies, such as trigger strategies, in which to begin by cooperating and will cooperate as long as the rivals do, and upon observing a defection, it will immediately imply to revert to a period of punishment of specified length in which everyone plays non-cooperatively. We show that trigger strategies are employed by both groups to sustain cooperation as equilibrium. Then, we conclude that players’ memory strategies are the key for attaining the maximum economic growth.

Suggested Citation

  • Edgar J. Sanchez Carrera, 2012. "On feedback nash equilibrium and cooperation in the neoclassical growth model," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 9(2), pages 29-43, Julio-Dic.
    • Handle: RePEc:qua:journl:v:9:y:2012:i:2:p:29-43
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    References listed on IDEAS

    as
    1. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    2. C. González-Alcón & J. Sicilia & J. A. Álvarez, 1999. "Nash Equilibria in a Differential Game of Economic Growth," Journal of Optimization Theory and Applications, Springer, vol. 103(2), pages 337-357, November.
    3. Kaitala, Veijo & Pohjola, Matti, 1990. "Economic Development and Agreeable Redistribution in Capitalism: Efficient Game Equilibria in a Two-Class Neoclassical Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 421-438, May.
    4. Lancaster, Kelvin, 1973. "The Dynamic Inefficiency of Capitalism," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1092-1109, Sept.-Oct.
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    More about this item

    Keywords

    Differential games; Nash equilibria; Neoclassical Growth model;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D69 - Microeconomics - - Welfare Economics - - - Other
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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