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A Nash equilibrium for differential games with moving-horizon strategies

Author

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  • Giovanni Di Bartolomeo
  • Willi Semmler
  • Enrico Saltari

Abstract

Our paper introduces a moving-horizon interaction in a strategic context. We assume that players can predict the effects of their actions and those of their opponents on a finite moving horizon. We define an equilibrium concept for this setting and develop an algorithm using nonlinear model predictive control techniques to compute it. Focusing on the forecasting horizon's length, we propose two economic interpretations of our equilibrium based on limited rationality and political economy literature. Finally, we consider a debt stabilization game in a monetary union to provide practical insights into our approach.

Suggested Citation

  • Giovanni Di Bartolomeo & Willi Semmler & Enrico Saltari, 2022. "A Nash equilibrium for differential games with moving-horizon strategies," wp.comunite 00160, Department of Communication, University of Teramo.
  • Handle: RePEc:ter:wpaper:00160
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    Cited by:

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    2. De Grauwe, Paul & Foresti, Pasquale, 2023. "Interactions of fiscal and monetary policies under waves of optimism and pessimism," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 466-481.
    3. Behnaz Minooei Fard & Willi Semmler & Giovanni Di Bartolomeo, 2023. "Rare Earth Elements: A game between China and the rest of the world," Working Papers in Public Economics 235, Department of Economics and Law, Sapienza University of Roma.

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    More about this item

    Keywords

    Nash equilibrium; moving-horizon strategy; model predictive control; debt stabilization; monetary union;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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