Dynamic Oligopolies

Sevin Yeltekin () and Kenneth Judd

No 376, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: We present a general method for computing the entire set of equilibrium payoffs for dynamic games with state variables, with and without complete information. We extend our earlier methods (Judd, Yeltekin, Conklin (Econometrica, 2003)) to games with physical states variables, and apply the procedure to a dynamic oligopoly game with costly capacity investment. Our algorithm allows us to study the nature of cooperation; in particular, we examine how the ability to collude is affected by state variables, such as current capacity, and whether investment decisions increase the gains from cooperation, or present opportunities to deviate from collusive agreements and reduce the potential for cooperation.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed009:376

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