On the Time Consistency of Equilibria in a Class of Additively Separable Differential Games

16 Pages Posted: 30 Jul 2009 Last revised: 16 Sep 2009

See all articles by Emanuele Bacchiega

Emanuele Bacchiega

University of Bologna - Department of Economics

Luca Lambertini

University of Bologna - Department of Economics

Arsen Palestini

MEMOTEF - Sapienza University of Rome

Date Written: September 10, 2009

Abstract

A class of state-redundant differential games games is detected, where players can be partitioned into two groups, so that the state dynamics and the payoff functions of all players are additively separable w.r.t. controls and states of any two players belonging to different groups. We prove that, in this class of games, open-loop Nash and feedback Stackelberg equilibria coincide, both being strongly time consistent. This allows us to bypass the issue of the time inconsistency that typically affects the open-loop Stackelberg solution.

Keywords: differential games, time consistency, additive separability

JEL Classification: C73

Suggested Citation

Bacchiega, Emanuele and Lambertini, Luca and Palestini, Arsen, On the Time Consistency of Equilibria in a Class of Additively Separable Differential Games (September 10, 2009). Available at SSRN: https://ssrn.com/abstract=1103900 or http://dx.doi.org/10.2139/ssrn.1103900

Emanuele Bacchiega (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
40126 Bologna, 40125
Italy
+390512098486 (Phone)
+390512098493 (Fax)

Luca Lambertini

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 2092600 (Phone)
+39 051 2092664 (Fax)

Arsen Palestini

MEMOTEF - Sapienza University of Rome ( email )

Via del Castro Laurenziano
Roma, Rome 00185
Italy

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