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A Pseudo "Folk" Theorem In The Strategic Provision Of Stock Externalities

Author

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  • ZILI YANG

    (P.O. Box 6000, Department of Economics, State University of New York at Binghamton, Binghamton, NY 13902-6000, USA)

Abstract

The paper discusses the relationship between the efficient provision and the Nash equilibrium of stock externalities in a dynamic setting. The following proposition has been proved: under certain conditions, the maximal gains of an agent in the economy by deviating from the Pareto optimal provision of stock externalities is less ∊, an arbitrary small positive number, when the time discount rate of the agents are sufficiently close to 0. Namely, under the same conditions, a Pareto efficient path is an ∊-Nash equilibrium where ∊ could be smaller than any predetermined level. The propositions are different from the folk theorems in repeated games because supporting of the ∊-Nash equilibrium does not require the threat of retaliations from other agents. The policy implications of the above results are also discussed here.

Suggested Citation

  • Zili Yang, 2003. "A Pseudo "Folk" Theorem In The Strategic Provision Of Stock Externalities," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 5(04), pages 347-359.
    • Handle: RePEc:wsi:igtrxx:v:05:y:2003:i:04:n:s0219198903001094
    DOI: 10.1142/S0219198903001094
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    Cited by:

    1. Syaglova, Yulia, 2015. "System Analysis Of Marketing Paradigms," Working Papers sy2, Russian Presidential Academy of National Economy and Public Administration.

    More about this item

    Keywords

    Open-loop Nash equilibrium; ∊-Nash equilibrium; stock externality; JEL classification code: C79; C62; D62;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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