long term competition in a dynamic game the cold fish war this article presents a model of credible voluntary collective agreements in a dynamic game these agreements are implicit in collections of history dependent threat strategies i consider the strategies in a game of resource exploitation credibility is represented by perfect equilibrium voluntarism requires at least that all behavior be supported by the threat of collapse of the agreement which would return the players to the memoryless equilibrium collective rationality requires that the agreement be robust to the possibility of mutually beneficial renegotiation i analyze the set of agreements meeting each of these restrictions

differential games with nonconvexities and positive spillovers abstract this paper deals with differential games characterized by nonconvexities and increasing returns the objective function of the players is convex in the control variables and nonconvex in the state variables we employ the open loop nash equilibrium solution concept this framework enables us to handle games characterized by positive spillovers and strategic complementarities e g capital accumulation differential games with learning by doing where the knowledge available to a firm is given by the knowledge accumulated by the economy as a whole

capital accumulation games with a non concave production function abstract we consider an economy with a single capital stock that two agents strategically exploit by choosing a consumption profile over an infinite time horizon we analyze two different games and their corresponding equilibria in one game firms are able to pre commit and choose simple time functions as their strategies in the other game agents are assumed to employ markov strategies it turns out that in the case of pre commitment there exists a threshold level of the capital stock such that if the initial stock is above this threshold equilibrium consumption converges to the efficient steady state while if the initial condition is below it the capital stock converges to zero in case of the markov equilibrium there exists a unique interior steady state that is globally stable

the limitations of market value accounting and a more realistic alternative abstract market value accounting mva might improve market and regulatory discipline on financial institutions unfortunately there are serious conceptual measurement and incentive problems with implementing mva that have not received significant attention these problems are suggested by the theory of asymmetric information and the role intermediaries play in solving information and monitoring problems after analyzing the problems with mva we develop an alternative approach that applies mva principles where they are most feasible and uses a statistical procedure where asymmetric information problems make mva particularly problematic an empirical analysis suggests that this procedure may substantially improve the distribution of regulatory discipline

a dynamic model of conflict and appropriation abstract this paper presents an extension of a static model of economic conflict analyzed by hirshleifer 1991 1995 and skaperdas 1992 to an infinite horizon differential game our aim is to highlight the strategic role of appropriation among a smaller group of agents in an intertemporal context the model yields the conclusion that there exists a unique linear nonlinear markov perfect equilibrium strategy even when strategies are defined over the entire state space we demonstrate that partial cooperation can be seen as a long run response to conflict moreover a decrease in the effectiveness of appropriation the depreciation rate of a common pool stock the rate of time preferences or an increase in the degree of noise improves the degree of partial cooperation and thus welfare in an anarchic society

who pays for bank insolvency this paper discusses proposals for handling bank failures in a manner that is rapid enough to allow the business to continue respects the ranking of claims makes none of the parties worse off than under traditional insolvency and does not require taxpayer funds except to guarantee the new organization until recapitalization it considers the relationship between the regime for bank exit and the rest of the framework for regulation and supervision the role of market discipline in enabling solutions before the point of insolvency is reached the problems in assessing the costs of different exit regimes and public intervention

towards post keynesian ecological macroeconomics the paper starts with a brief criticism of macroeconomic analyses of different schools of thought for their focus on economic growth and maximisation of output this applies to the traditional keynesian approach which has focused on the achievement of sufficient aggregate demand to underpin full employment and full capacity utilisation down playing aggregate supply constraints this also applies to the neoclassical approach including the current new consensus macroeconomics approach which asserts the dominant role of aggregate supply in the long run and where growth is set by the so called natural rate of growth with no concerns over environmental and ecological issues the paper then proposes a different approach to macroeconomic analysis it explicitly acknowledges that economic growth is a double edged sword growth can help to alleviate persistent levels of high unemployment but it can also lead to potentially catastrophic environmental problems building on the monetary circuit theory and the demand led growth theory the paper offers an analysis of the interconnections and interdependence of the economic biophysical and social worlds and by doing it hopes to provide the building blocks for the establishment of post keynesian ecological macroeconomics

network effects aftermarkets and the coase conjecture a dynamic markovian approach this paper investigates the expansion of the network of a monopolist firm that produces a durable good and is also involved in the corresponding aftermarket we characterize the markov perfect equilibrium of the continuous time dynamic game played by the monopolist and the forward looking consumers under the assumption that consumers benefit from the subsequent expansion of the network the paper contributes to the theoretical discussion on the validity of the coase conjecture analyzing whether coase s prediction that the monopolist serves the market in a twinkling of an eye remains valid in our setup we conclude that the equilibrium network development may actually be gradual contradicting coase s conjecture we find that a necessary condition for such a result is the existence of aftermarket network effects that accrue at least partly to the monopolist firm

comparative dynamics in a productive asset oligopoly abstract we build a subgame perfect nash equilibrium of a common property productive asset oligopoly and analyze separately the impact of a change in the implicit growth rate of the asset and a change in the number of firms exploiting the asset we show that the steady state level of asset can be a decreasing function of the asset s implicit growth rate this phenomenon arises when the initial stock of asset is below a certain threshold in the short run we show that firms exploitation rate can be a decreasing function of the implicit growth rate we study the impact of a change in the number of firms that share access to the asset reducing the number of firms can result in the long run in higher industry production in the short run it can result in an increase of the industry s exploitation and a decrease of the level of the asset s stock

stackelberg versus cournot a differential game approach abstract we propose an infinite horizon differential oligopoly game where at each point in time m stackelberg leaders and n m stackelberg followers exploit a common pool renewable resource and sell their harvest in the marketplace at a price that depends on total harvest we derive a feedback generalized stackelberg nash cournot equilibrium a generalization of the feedback stackelberg equilibrium nesting feedback stackelberg and feedback cournot as special cases we proceed with a comparison between the feedback stackelberg and the feedback cournot equilibria and find a number of interesting results in contrast with static oligopoly theory as to the relative efficiency of the two equilibria we show that the cournot equilibrium can be more efficient than the stackelberg equilibrium this holds true in the short run at the steady state and in terms of discounted welfare

on the multiplicity of efficiency inducing tax rules abstract we derive corrective tax rules for a monopoly whose production processes generate emissions that add to a stock of pollution which evolves over time in our model the monopolist maximizes the discounted sum of its instantaneous profits and the government designs a tax rule that corrects for both the externalities associated with pollution and the market power of the monopolist we show that there exists a continuum of time independent tax rules that guide the monopolist to achieve the socially optimum production path

carbon capture and storage and transboundary pollution a differential game approach abstract we study the strategic behavior of two countries facing transboundary co2 pollution under a differential game setting in our model the reduction of co2 concentration occurs through the carbon capture and storage process rather than through the adoption of cleaner technologies furthermore we first provide the explicit short run dynamics for this dynamic game with symmetric open loop and a special markovian nash strategy then we compare these strategies at the games steady states and along some balanced growth paths our results show that if the initial level of co2 is relatively high state dependent emissions reductions can lead to higher overall environmental quality hence feedback strategy leads to less social waste

dynamic resource management under the risk of regime shifts abstract this paper provides a framework through which a dynamic resource management problem with potential regime shifts can be analyzed both in a strategic environment and from a social planner s perspective based on a fairly general model a condition for a precautionary policy is discussed by applying the framework to a common property resource problem with a linear production technology we illustrate how the qualitative as well as quantitative nature of equilibrium is altered due to the possibility of regime shifts in particular when the risk is endogenously affected by the players behavior potential regime shifts can facilitate the precautionary management of resources as long as the resource stock is in good shape as the stock of resource becomes scarce however the precautionary effect vanishes and more aggressive resource exploitation emerges the impacts of irreversibility on the equilibrium behavior are highlighted it is also shown that there can exist a resource depletion trap in which a regime shift once it happens triggers a continuous decline of resource stock no matter which regime materializes in the subsequent periods

policy effectiveness in spatial resource wars a two region model abstract we develop a spatial resource model in continuous time in which two agents strategically exploit a mobile resource in a two region setup to counteract the overexploitation of the resource the tragedy of commons that occurs when players are free to choose where to harvest the regulator can establish a series of spatially structured policies we compare the equilibria in the case of a common resource with those that emerge when the regulator either creates a natural reserve or assigns territorial user rights to the players we show that when technological and preference parameters dictate a low harvesting effort the policies are ineffective in promoting the conservation of the resource and in addition they lead to a lower payoff for at least one of the players conversely in a context of higher harvesting effort the intervention can help to safeguard the resource preventing extinction while also improving the welfare of both players

which banks choose deposit insurance evidence of adverse selection and moral hazard in a voluntary insurance system this article investigates adverse selection and moral hazard in the voluntary deposit insurance system of kansas which operated from 1909 to 1929 regulations were imposed to limit risk taking and membership was made voluntary to assuage objections that insurance forces conservative banks to protect depositors of high risk institutions the authors find however that risk prone banks were the most likely to join the system at its inception using a simultaneous equations model they also detect both adverse selection and moral hazard behavior throughout the system s first ten years copyright 1995 by ohio state university press

duopoly can be more anti competitive than monopoly abstract we prove two results on feedback equilibria under dynamic renewable resource duopoly the linear feedback output is smallest which sharply contrasts to the existing literature where it is largest moreover prices in two feedback equilibria are higher than under monopoly

non linear strategies in a linear quadratic differential game abstract we study non linear markov perfect equilibria in a two agent linear quadratic differential game in contrast to the literature owing to tsutsui and mino 1990 nonlinear strategies in dynamic duopolistic competition with sticky prices journal of economic theory 52 136 161 we do not associate endogenous subsets of the state space with candidate solutions instead we use the catching up optimality criterion to address the possibility of infinitely valued value functions applying sufficiency conditions for existence based on those in dockner et al 2000 differential games in economics and management science cambridge university press cambridge yields the familiar linear mpe and a condition under which a continuum of non linear mpes exists these include as their limit a previously unreported piecewise linear mpe the condition relaxes with increasing patience allowing more efficient steady states thus suggesting a folk theorem for differential games as the lower state and control bounds go to the non linear strategies are eliminated

climate contracts a game of emissions investments negotiations and renegotiations the paper presents a dynamic game where players can contribute to a public bad invest in technologies and write incomplete contracts despite the n 1 stocks in the model the analysis is tractable and the symmetric markov perfect equilibrium unique the framework helps to analyze emissions investments and international environmental agreements if only the emission levels are contractible then investments are suboptimally small if the contract is short term or close to its expiration date to encourage investments the optimal contract is more ambitious if it is short term and it is tougher to satisfy close to its expiration date and for countries with small investment costs if renegotiation is possible such an incomplete contract implements the rst best the results have important lessons for how to design a climate treaty

feedback equilibria in a dynamic renewable resource oligopoly pre emption voracity and exhaustion abstract we revisit a recent literature on productive asset exploitation describing a differential oligopoly game of resource extraction under static linear feedback and nonlinear feedback strategies where we explicitly allow for the possibility of resource exhaustion we show that i feedback rules entail resource exhaustion for a finite number of firms and ii feedback strategies are more aggressive than static ones as long as the resource stock is large enough in accordance with the acquired view based on the traditional pre emption argument associated with feedback information

consumer surplus enhancing cooperation in a natural resource oligopoly abstract in this study we use a differential game to illustrate that cooperation among oligopolists selling a common pool renewable resource may lead not only to higher industrial output consumer surplus and resource stock in the stationary equilibrium but also a greater discounted sum of consumer surplus a priori this finding is not straightforward an increase in the coefficient of cooperation causes industry output to first decrease and then increase over time thus making consumers worse off in the short run and better off in the long run this study establishes the conditions under which the long run effects outweigh the short run effects of cooperation leading to an increase in the discounted sum of consumer surplus our analysis suggests that in some cases conservation cartels should be promoted on the basis of not only resource conservation but also efficiency

existence and properties of equilibria for a dynamic game on productive assets abstract we consider a model in which two agents share access to the same stock of a productive asset and study the implications of non cooperative consumption behavior over time under standard assumptions on the production function we construct infinitely many nash equilibria all of which consist of stationary markovian strategies these equilibria result in overconsumption so that the uniquely determined long run asset stock is too low as compared to the cooperative solution however in the limit as the discount rate becomes sufficiently small the stead states generated by the markovian nash equilibria converge to the efficient steady state journal of economic literatureclassification numbers c73 o41 q22

on the markovian efficiency of bertrand and cournot equilibria we characterize and compare closed loop feedback price and quantity strategies within a full fledged dynamic model of oligopolistic competition in which production requires exploitation of a renewable productive asset unlike previous papers on the strategic exploitation of productive assets we allow for imperfect product substitutability which enables us to deal with price competition we show that the traditional result that the bertrand equilibrium is more efficient than the cournot equilibrium does not necessarily hold in a markovian environment either in the short run or at the stationary equilibrium or using the discounted sum of welfare as a criterion for relative efficiency

oligopoly extraction of a common property natural resource the importance of the period of commitment in dynamic games the theory of noncooperative dynamic games has provided an extremely powerful framework for studying many of the classic questions in industrial organization for example questions about resource extraction advertising research and development investment in new capacity and barriers to entry where interactions over time among few firms are involved however an important methodological issue arises when economic competition over time is modeled as a dynamic game the issue is the appropriate formulation of the players strategy spaces

unilateral production restrictions in a dynamic duopoly abstract this paper examines a dynamic game of exploitation of a productive asset by a duopoly a closed loop nash equilibrium of the game is constructed and used to analyze the effects of a unilateral production restriction surprisingly such unilateral action may result in a decrease of the long run asset s stock we also exhibit production restrictions that can result simultaneously in an increase of the asset s stock and the long run profits of the firm that is being imposed the production restriction moreover a unilateral decrease of the production of one firm can induce its rival to also decrease its production

oligopoly exploitation of a private property productive asset abstract in this paper we build a closed loop nash equilibrium of a private property productive asset oligopoly we compare and contrast private with common property in terms of exploitation rates and social welfare and provide a comparative dynamic analysis with respect to the number of firms in the industry contrary to previous studies on oligopolistic exploitation of productive assets before exploitation begins the resource is parcelled out each firm privately owns and manages the assigned parcel over the entire planning horizon compared with the common property regime we find a new set of results both in the short and in the long run as for social welfare we provide conditions on the implicit growth rate and the initial asset stock under which the socially optimal allocation of the resource implies a natural monopoly