Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2020-04-20
Number: 20-020/II
Author-Name: Niko Jaakkola
Author-Workplace-Name: University of Bologna
Author-Name: Florian Wagener
Author-Workplace-Name: University of Amsterdam
Title: All symmetric equilibria in differential games with public goods
Abstract: We characterise the entire set of symmetric stationary Markov-perfect Nash equilibria (MPE) in a differential game of public good investment, using the canonical problem of climate change as an example. We provide a sufficient and necessary condition for MPE and show how the entire set of MPE is constructed. The equilibrium in continuous strategies, unique in our context, is Pareto-dominated by any other equilibrium. If a Pareto- undominated steady state exists, it is sustained by trigger-like strategies, with deviations above and below the steady state leading to different re- sponses. We extend the theory of differential games to deal with payoffs under discontinuous strategies. Our methods work under general functional forms.
Classification-JEL: C73, Q54
File-URL: https://papers.tinbergen.nl/20020.pdf
File-Format: application/pdf
File-Size: 1528768 bytes
Handle: RePEc:tin:wpaper:20200020