A Newton Collocation Method for Solving Dynamic Bargaining Games

John Duggan and Tasos Kalandrakis

No WP60, Wallis Working Papers from University of Rochester - Wallis Institute of Political Economy

Abstract: We develop and implement a collocation method to solve for an equilibrium in the dynamic legislative bargaining game of Duggan and Kalandrakis (2008). We formulate the collocation equations in a quasi-discrete version of the model, and we show that the collocation equations are locally Lipchitz continuous and directionally differentiable. In numerical experiments, we successfully implement a globally convergent variant of Broyden's method on a preconditioned version of the collocation equations, and the method economizes on computation cost by more than 50% compared to the value iteration method. We rely on a continuity property of the equilibrium set to obtain increasingly precise approximations of solutions to the continuum model. We showcase these techniques with an illustration of the dynamic core convergence theorem of Duggan and Kalandrakis (2008) in a nine-player, two-dimensional model with negative quadratic preferences.

Pages: 40 pages
Date: 2009-08
New Economics Papers: this item is included in nep-cmp, nep-dge, nep-gth and nep-mic
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: A Newton collocation method for solving dynamic bargaining games (2011)
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