Weak and Strong Time Consistency in a Differential Oligopoly Game with Capital Accumulation

Journal of Optimization Theory and Applications (Impact Factor: 1.51). 01/2008; 138(1):17-26. DOI: 10.1007/s10957-008-9432-0


We illustrate a differential oligopoly game with capital accumulation where the accumulation dynamics of productive capacity
is modelled à la Ramsey. The model is solved under the open-loop information structure, to show that it admits an open-loop
Nash equilibrium which is indeed a degenerate feedback one and therefore strongly time consistent, even if, by construction,
the problem under consideration is not a linear state game.

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    • "A similar argument proves the result in the case of Bertrand competition. Cellini and Lambertini [29] revisit an oligopoly Cournot game with capital accumulation à la Ramsey. Following the same steps as above the authors show that there exists an open-loop Nash equilibrium which is a degenerate feedback equilibrium and hence subgame perfect. "
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