TY - JOUR

T1 - Cooperative Dynamic Games with Durable Controls

T2 - Theory and Application

AU - Petrosyan, Leon A.

AU - Yeung, David W.K.

N1 - Petrosyan, L.A. & Yeung, D.W. Dyn Games Appl (2019). https://doi.org/10.1007/s13235-019-00336-w

PY - 2019/12/17

Y1 - 2019/12/17

N2 - Durable controls that have effects lasting over a certain period of time are prevalent in real-life situations. Revenue-generating investments, toxic waste disposal, durable goods, emission of pollutants, regulatory measures, coalition agreements, diffusion of knowledge, advertisement and investments to build up physical capital are vivid examples of durable controls. Durable controls may affect both the decision-makers’ payoffs and the evolution of the state dynamics. This paper develops a new class of cooperative dynamic games with multiple durable controls of different lag durations affecting both the players’ payoffs and the state dynamics. A novel dynamic optimization theorem involving durable controls is derived. Dynamically consistent cooperative solutions are provided. An illustration of a dynamic game with durable controls causing lagged effects in capital formation, pollution accumulation and revenue generation from investment is presented. The analysis widens the application of dynamic game theory in practical problems. Further theoretical developments and relevant applications along this line would be expected.

AB - Durable controls that have effects lasting over a certain period of time are prevalent in real-life situations. Revenue-generating investments, toxic waste disposal, durable goods, emission of pollutants, regulatory measures, coalition agreements, diffusion of knowledge, advertisement and investments to build up physical capital are vivid examples of durable controls. Durable controls may affect both the decision-makers’ payoffs and the evolution of the state dynamics. This paper develops a new class of cooperative dynamic games with multiple durable controls of different lag durations affecting both the players’ payoffs and the state dynamics. A novel dynamic optimization theorem involving durable controls is derived. Dynamically consistent cooperative solutions are provided. An illustration of a dynamic game with durable controls causing lagged effects in capital formation, pollution accumulation and revenue generation from investment is presented. The analysis widens the application of dynamic game theory in practical problems. Further theoretical developments and relevant applications along this line would be expected.

KW - Control lags

KW - Cooperative dynamic games

KW - Durable controls

KW - Dynamically consistent solution

UR - http://www.scopus.com/inward/record.url?scp=85076903195&partnerID=8YFLogxK

U2 - 10.1007/s13235-019-00336-w

DO - 10.1007/s13235-019-00336-w

M3 - Article

AN - SCOPUS:85076903195

SP - 1

EP - 25

JO - Dynamic Games and Applications

JF - Dynamic Games and Applications

SN - 2153-0785

ER -