How Can Decentralized Non-Cooperative Stabilization Policies Be Efficient? — A Differential Game Approach

Conference paper
Part of the Studies in Empirical Economics book series (STUDEMP)


It is well known that non-cooperative behaviour of different policy-makers, either central bank and government on a national level or governments of different countries on an international level, may result in severe overall losses and inefficiencies. On the other hand, policy coordination is difficult to achieve, given the mechanisms of negotiations between several policy-making institutions. A solution to this “trade-off” would be a mechanism inducing individual behaviour that ensures efficient (Pareto-optimal) outcomes equivalent to those achieved by cooperation, but without the need of explicit agreements.


Nash Equilibrium Equilibrium Solution Feedback Strategy Policy Coordination Memory Strategy 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Baar, T. and G.J. Olsder (1982): “Dynamic noncopperative game theory.” Academic Press, London et al.Google Scholar
  2. Cohen, D. and P. Michel (1988): “How should control theory be used to calculate a time-consistent government policy?” Review of Economic Studies, 55, pp.263–274.CrossRefGoogle Scholar
  3. Dockner, E.J. and R. Neck (1988): “Time-consistency, subgame-perfectness, solution concepts and information patterns in dynamic models of stabilization policies.” Unpublished manuscript, Saskatoon.Google Scholar
  4. Friedman, J.W. (1977): “Oligopoly and the theory of games.” North-Holland, Amsterdam et al.Google Scholar
  5. Haurie, A. and B. Tolwinski (1985): “Definition and properties of cooperative equilibria in a two-player game of infinite duration.” Journal of Optimization Theory and Applications, 46, pp.525–534.CrossRefGoogle Scholar
  6. Leitmann, G. (1974): “Cooperative and non-cooperative many players differential games.” Springer Verlag, Vienna.Google Scholar
  7. Levine, P. and D. Currie (1985): “Optimal feedback rules in an open economy macromodel with rational expectations.” European Economic Review, 27, pp.141–163.CrossRefGoogle Scholar
  8. Levine, P. and D. Currie (1987): “Does international macroeconomic policy coordination pay and is it sustainable? A two country analysis.” Oxford Economic Papers, 33, pp.38–74.Google Scholar
  9. Miller, M. and M. Salmon (1985): “Dynamic games and the time inconsistency of optimal policy in open economies.” Economic Journal, Supplement, 95, pp.124–137.CrossRefGoogle Scholar
  10. Neck, R. and E.J. Dockner (1987): “Conflict and cooperation in a model of stabilization policies: A differential game approach.” Journal of Economic Dynamics and Control, 11, pp. 153–158.CrossRefGoogle Scholar
  11. Neck, R. and E.J. Dockner (1988): “Commitment and coordination in a dynamic game model of international economic policy-making.” Unpublished manuscript, Vienna.Google Scholar
  12. Neese, J.W. and R.S. Pindyck (1984): “Behavioural assumptions in decentralised stabilisation policies.” In: A. J. Hughes Hallett (ed.), Applied decision analysis and economic behaviour. Martinus Nijhoff, Dordrecht.Google Scholar
  13. Oudiz, G. and J. Sachs (1984): “Macroeconomic policy coordination among the industrial economies.” Brookings Papers on Economic Activity, (1), pp. 1–64.CrossRefGoogle Scholar
  14. Oudiz, G. and J. Sachs (1985): “International policy coordination in dynamic macroeconomic models.” In: W. H. Buiter and R. C. Marston (eds.), International economic policy coordination. Cambridge University Press, Cambridge.Google Scholar
  15. Reinganum, J.F. and N.S. Stokey (1985): “Oligopoly extraction of a common property natural resource: The importance of the period of commitment in dynamic games.” International Economic Review, 26, pp.161–173.CrossRefGoogle Scholar
  16. Rogoff, K. (1985): “Can international monetary policy cooperation be counterproductive?” Journal of International Economics, 18, pp.199–217.CrossRefGoogle Scholar
  17. Selten, R. (1975): “Reexamination of the perfectness concept for equilibrium points in extensive games.” International Journal of Game Theory, 4, pp.25–55.CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 1995

Authors and Affiliations

There are no affiliations available

Personalised recommendations