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Dynamic Game Model of Endogenous Growth with Consumption Externalities

Author

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  • K. Hori

    (Kyoto University)

  • A. Shibata

    (Kyoto University)

Abstract

This paper introduces consumption externalities into an endogenous growth model of common capital accumulation and characterizes balanced growth equilibria. Contrary to the standard argument in previous studies, we show that the growth rate in a feedback Nash equilibrium can be higher than that in an open-loop Nash equilibrium if agents strongly admire the consumption of others. This result is irrelevant to whether preferences exhibit “keeping up with the Joneses” or “running away from the Joneses”.

Suggested Citation

  • K. Hori & A. Shibata, 2010. "Dynamic Game Model of Endogenous Growth with Consumption Externalities," Journal of Optimization Theory and Applications, Springer, vol. 145(1), pages 93-107, April.
    • Handle: RePEc:spr:joptap:v:145:y:2010:i:1:d:10.1007_s10957-009-9631-3
    DOI: 10.1007/s10957-009-9631-3
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    More about this item

    Keywords

    Differential games; Consumption externalities; Endogenous growth; Open-loop Nash equilibrium; Feedback Nash equilibrium;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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