A Dynamic Conjectural Variations Model in the Private Provision of Public Goods: a Differential Game Approach

Jun-ichi Itaya () and Koji Shimomura

No 104, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: The purpose of this paper is to provide reasonable microfoundation to justify the concept of a conjectural valuations equilibrium which is often used in the literature on the private provision of public goods by incorporating an explicit dynamic process of learning with the help of the differential game. By interpreting the steady state conjectures in such a dynamic provision game as the conjectural variations variations in the corresponding static game, we derive zero or nonzero conjectural variations as an outcome of a learning process. Furthermore, we find that there may be uncountable conjectural variations and the possibility of matching behavior (i.e., positive conjectures), when nonlinear feedback strategies are available and when the domain of a state variable is appropriately restricted.

Keywords: Social welfare; International trade; Public goods (search for similar items in EconPapers)
JEL-codes: D62 F13 H41 (search for similar items in EconPapers)
Pages: 33 pages
Date: 1999-09
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Journal Article: A dynamic conjectural variations model in the private provision of public goods: a differential game approach (2001)
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