Title

The envelope theorem for locally differentiable Nash equilibria of finite horizon differential games

Authors

Authors

M. R. Caputo

Comments

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Abbreviated Journal Title

Games Econ. Behav.

Keywords

envelope theorem; differential games; Nash equilibria; OPEN-LOOP; COMPARATIVE STATICS; DYNAMIC GAME; OLIGOPOLY; Economics

Abstract

Envelope theorems are established for a ubiquitous class of finite horizon differential games. The theorems cover open-loop and feedback information patterns in which the corresponding Nash equilibria are locally differentiable with respect to the parameters of the game. Their relationship with extant envelope results is discussed and an application of them to a generalized capital accumulation game is provided. An important implication of the theorems is that, in general, the archetypal economic interpretation of the costate vector, namely, as the shadow value of the state vector along the Nash equilibrium, is valid for feedback Nash equilibria, but not for open-loop Nash equilibria. (C) 2007 Elsevier Inc. All rights reserved.

Journal Title

Games and Economic Behavior

Volume

61

Issue/Number

2

Publication Date

1-1-2007

Document Type

Article

Language

English

First Page

198

Last Page

224

WOS Identifier

WOS:000250904700002

ISSN

0899-8256

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