Numerical solution of dynamic oligopoly games with capital investment
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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.
author list (cited authors)
Vedenov, D. V., & Miranda, M. J.
complete list of authors
Vedenov, Dmitry V||Miranda, Mario J