Dynamic Game Model of Endogenous Growth with Consumption Externalities

K. Hori () and Akihisa Shibata
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K. Hori: Kyoto University

Journal of Optimization Theory and Applications, 2010, vol. 145, issue 1, No 6, 93-107

Abstract: Abstract This paper introduces consumption externalities into an endogenous growth model of common capital accumulation and characterizes balanced growth equilibria. Contrary to the standard argument in previous studies, we show that the growth rate in a feedback Nash equilibrium can be higher than that in an open-loop Nash equilibrium if agents strongly admire the consumption of others. This result is irrelevant to whether preferences exhibit “keeping up with the Joneses” or “running away from the Joneses”.

Keywords: Differential games; Consumption externalities; Endogenous growth; Open-loop Nash equilibrium; Feedback Nash equilibrium (search for similar items in EconPapers)
Date: 2010
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Working Paper: Dynamic game model of endogenous growth with consumption externalities (2009)
Working Paper: A Dynamic Game Model of Endogenous Growth with Consumption Externalities (2008)
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DOI: 10.1007/s10957-009-9631-3

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