Envelope theorems for locally differentiable open-loop Stackelberg equilibria of finite horizon differential games
Abbreviated Journal Title
J. Econ. Dyn. Control
Stackelberg duopoly; Envelope theorems; Differential games; Open-loop; information structure; INVESTMENT; Economics
Envelope theorems are established for locally differentiable Stackelberg equilibria of a general class of finite horizon differential games with an open-loop information structure. It is shown that the follower's envelope results agree in form with those of any player in an open-loop Nash equilibrium, while those of the leader differ. An unanticipated conclusion is that the costate vector of the leader but not that of the follower corresponding to the state vector of the differential game may be legitimately interpreted as the shadow value of the state vector for time-inconsistent open-loop Stackelberg equilibria. Surprisingly, the same cannot be said for time-consistent open-loop Stackelberg equilibria. (C) 2010 Elsevier B.V. All rights reserved.
Journal of Economic Dynamics & Control
"Envelope theorems for locally differentiable open-loop Stackelberg equilibria of finite horizon differential games" (2010). Faculty Bibliography 2010s. 885.