Numerical solution of dynamic oligopoly games with capital investment

Dmitry Vedenov and Mario Miranda ()

Economic Theory, 2001, vol. 18, issue 1, 237-261

Abstract: 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 non-quadratic 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.

Keywords: Dynamic; games; -; Oligopoly; -; Numerical; methods; -; Computational; economics. (search for similar items in EconPapers)
JEL-codes: C63 C73 L13 (search for similar items in EconPapers)
Date: 2001-04-11
Note: Received: June 1, 2000; revised version: December 27, 2000
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Citations: View citations in EconPapers (24)

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