Numerical solution of dynamic oligopoly games with capital investment Academic Article uri icon


  • This paper discusses how numerical techniques may be used to solve the simultaneous functional equations that arise in general dynamic stochastic games. Unlike the conventional linear-quadratic approach, our methods may be used to address general model specifications that may include nonquadratic objective functions, non-linear equations of motion, and constraints on decision variables. As an illustration, we apply our methods to a dynamic duopoly game in which competing firms play short-run quantity game subject to production cost that can be lowered through investment in capital stock in the long run.

published proceedings

  • Economic Theory

author list (cited authors)

  • Vedenov, D. V., & Miranda, M. J.

citation count

  • 30

complete list of authors

  • Vedenov, Dmitry V||Miranda, Mario J

publication date

  • January 2001