Dynamic Voluntary Provision of Public Goods with Uncertainty: A Stochastic Differential Game Model

18 Pages Posted: 9 Mar 2008 Last revised: 16 Apr 2009

See all articles by Wen-Kai Wang

Wen-Kai Wang

National University of Kaohsiung - Department of Finance

Christian-Oliver Ewald

University of Glasgow; Høgskole i Innlandet

Date Written: April 14, 2009

Abstract

Fershtman and Nitzan (1991) presented a continuous dynamic public good game model and solved the model for feedback Nash-equilibria. Wirl (1996) extended the model and considered nonlinear strategies. Both models do not include uncertainty and hence neglect an important factor in the theory of public goods. We extend the framework of Nitzan and Fershtman and include a diffusion term. We consider two cases. In the first case the volatility of the diffusion term is dependent on the current level of the public good. This setup will in principle lead to the same feedback strategies computed under certainty. In the second case the volatility is dependent on the current rate of public good provision by the agents. The result in this case is qualitatively different from the first one. We provide a detailed discussion of our results as well as numerical examples.

Keywords: Stochastic differential games, Public goods, Hamilton-Jacobi-Bellman equations

JEL Classification: C61, C73, D21, D62

Suggested Citation

Wang, Wen-Kai and Ewald, Christian-Oliver, Dynamic Voluntary Provision of Public Goods with Uncertainty: A Stochastic Differential Game Model (April 14, 2009). Available at SSRN: https://ssrn.com/abstract=1103120 or http://dx.doi.org/10.2139/ssrn.1103120

Wen-Kai Wang

National University of Kaohsiung - Department of Finance ( email )

700 Kaohsiung University Rd.
Nanzih District
Kaohsiung 803
Taiwan

Christian-Oliver Ewald (Contact Author)

University of Glasgow ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom

Høgskole i Innlandet ( email )

Lillehammer, 2624
Norway

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
154
Abstract Views
1,059
rank
215,127
PlumX Metrics