Abstract

SANCHEZ CARRERA, Edgar J.. On feedback nash equilibrium and cooperation in the neoclassical growth model. EconoQuantum [online]. 2012, vol.9, n.2, pp.29-43. ISSN 2007-9869.

Far away from any ideological point of view, our aim in this paper is to study, in a differential-game-theoretical approach, the standard growth model. Our baseline model comes from Kaitala y Pohjola (2009) based on the original ideas of Lancaster (1973). We focus on the computation of feedback strategies and we use history-dependent strategies, such as trigger strategies, in which to begin by cooperating and will cooperate as long as the rivals do, and upon observing a defection, it will immediately imply to revert to a period of punishment of specified length in which everyone plays non-cooperatively. We show that trigger strategies are employed by both groups to sustain cooperation as equilibrium. Then, we conclude that players' memory strategies are the key for attaining the maximum economic growth.

Keywords : Differential games; Nash equilibria; Neoclassical Growth model.