Optimal switching from competition to cooperation: a preliminary exploration

Raouf Boucekkine (), Carmen Camacho () and Benteng Zou
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Carmen Camacho: PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: In this paper, we tackle a generic optimal regime switching problem where the decision making process is not the same from a regime to another. Precisely, we consider a simple model of optimal switching from competition to cooperation. To this end, we solve a two- stage optimal control problem. In the first stage, two players engage in a dynamic game with a common state variable and one control for each player. We solve for open-loop strategies with a linear state equation and linear-quadratic payoffs. More importantly, the players may also consider the possibility to switch at finite time to a cooperative regime with the associated joint optimization of the sum of the individual payoffs. Using the- oretical analysis and numerical exercises, we study the optimal switching strategy from competition to cooperation. We also discuss the reverse switching.

Keywords: Cooperation; competition; dynamic games; multi-stage optimal control (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-com, nep-gth and nep-ore
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02434786v1
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Optimal switching from competition to cooperation: a preliminary exploration (2021)
Working Paper: Optimal switching from competition to cooperation: a preliminary exploration (2021)
Working Paper: Optimal switching from competition to cooperation: a preliminary exploration (2020)
Working Paper: Optimal switching from competition to cooperation: a preliminary exploration (2020)
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