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A game theoretical approach to public investment versus private investment
Author(s)
Date Issued
1990
Publisher
New York: Springer
Series/Report no.
Lecture Notes in Control and Information Sciences;157
ISBN
9783540537854
9783540470960
Citation
In Hamalainen, R. P., & Ehtamo, H. K. (eds.) (1990). Dynamic games in economic analysis (pp. 29-38). New York: Springer.
Type
Book Chapter
Abstract
In this paper, private investment and public investment are modelled in a differential game framework. A feedback Nash equilibrium solution is obtained. The private saving rate and the government's income tax rate are derived as functions of time, private capital stock, and public capital stock. Their relationship with model parameters — like the discount rate, the depreciation rate, terminal valuation of capital stock, marginal product of capital and the planning horizon — are examined. Various extensions of the basic model are made.
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