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A Dynamic Conjectural Variations Model in the Private Provision of Public Goods: a Differential Game Approach

Author

Listed:
  • Jun-ichi Itaya

    (Faculty of Economics, Hokkaido University, Japan)

  • Koji Shimomura

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

The purpose of this paper is to provide reasonable microfoundation to justify the concept of a conjectural valuations equilibrium which is often used in the literature on the private provision of public goods by incorporating an explicit dynamic process of learning with the help of the differential game. By interpreting the steady state conjectures in such a dynamic provision game as the conjectural variations variations in the corresponding static game, we derive zero or nonzero conjectural variations as an outcome of a learning process. Furthermore, we find that there may be uncountable conjectural variations and the possibility of matching behavior (i.e., positive conjectures), when nonlinear feedback strategies are available and when the domain of a state variable is appropriately restricted.

Suggested Citation

  • Jun-ichi Itaya & Koji Shimomura, 1999. "A Dynamic Conjectural Variations Model in the Private Provision of Public Goods: a Differential Game Approach," Discussion Paper Series 104, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:104
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    References listed on IDEAS

    as
    1. Tsutsui, Shunichi & Mino, Kazuo, 1990. "Nonlinear strategies in dynamic duopolistic competition with sticky prices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 136-161, October.
    2. Fershtman, Chaim & Nitzan, Shmuel, 1991. "Dynamic voluntary provision of public goods," European Economic Review, Elsevier, vol. 35(5), pages 1057-1067, July.
    3. Scafuri, Allen J., 1988. "On consistency of conjectures in the private provision of public goods," Journal of Public Economics, Elsevier, vol. 37(3), pages 395-398, December.
    4. Shimomura, Koji, 1991. "The feedback equilibria of a differential game of capitalism," Journal of Economic Dynamics and Control, Elsevier, vol. 15(2), pages 317-338, April.
    5. Todd Sandler & John Posnett, 1991. "The Private Provision of Public Goods: a Perspective on Neutrality," Public Finance Review, , vol. 19(1), pages 22-42, January.
    6. Cornes, Richard & Sandler, Todd, 1985. "On the consistency of conjectures with public goods," Journal of Public Economics, Elsevier, vol. 27(1), pages 125-129, June.
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    8. Itaya, Jun-ichi & Dasgupta, Dipankar, 1995. "Dynamics, Consistent Conjectures, and Heterogeneous Agents in the Private Provision of Public Goods," Public Finance = Finances publiques, , vol. 50(3), pages 371-389.
    9. Sugden, Robert, 1985. "Consistent conjectures and voluntary contributions to public goods: why the conventional theory does not work," Journal of Public Economics, Elsevier, vol. 27(1), pages 117-124, June.
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    More about this item

    Keywords

    Social welfare; International trade; Public goods;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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