On the Feedback Solution of a Differential Oligopoly Game with Capacity Adjustment

We propose a simple method for characterising analytically the feedback solution of oligopoly games with capital accumulation à la Solow-Swan. As a result, it becomes possible to contrast the feedback equilibrium against the corresponding one generated by open-loop information. Our method accommodates extensions of the stripped down oligopoly model in several directions. As an example, we expand the setup to include environmental effects and Pigouvian taxation.

Keywords: capacity, differential game, feedback equilibrium, Hamilton-Jacobi-Bellman equation

JEL Classification: C73, L13, Q55

Suggested Citation: Suggested Citation

Dragone, Davide and Lambertini, Luca and Palestini, Arsen, On the Feedback Solution of a Differential Oligopoly Game with Capacity Adjustment (March 14, 2011). Quaderni DSE Working Paper No. 741, Available at SSRN: https://ssrn.com/abstract=1791542 or http://dx.doi.org/10.2139/ssrn.1791542