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Credibility of Incentive Equilibrium Strategies in Linear-State Differential Games

Guiomar Martin-Herran and Georges Zaccour

Journal of Optimization Theory and Applications, 2005, vol. 126, issue 2, No 9, 367-389

Abstract: Abstract We characterize in this paper the credibility of incentive equilibrium strategies for the class of linear-state differential games. We derive a general condition for credibility and illustrate its use on two differential games taken from the literature of environmental economics and knowledge accumulation. We show that the proposed linear incentive strategies are not always credible. Further, we provide alternative nonlinear credible strategies which suggest that we should not stick only to linear incentive strategies, even in a simple class of differential games such as the linear-state one.

Keywords: Linear-state differential games; cooperation; incentive equilibria; credibility; environmental economics; knowledge acccumulation (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s10957-005-4722-2

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Handle: RePEc:spr:joptap:v:126:y:2005:i:2:d:10.1007_s10957-005-4722-2