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Dynamic Game Model of Endogenous Growth with Consumption Externalities

  • K. HoriEmail author
  • A. Shibata
Article

Abstract

This paper introduces consumption externalities into an endogenous growth model of common capital accumulation and characterizes balanced growth equilibria. Contrary to the standard argument in previous studies, we show that the growth rate in a feedback Nash equilibrium can be higher than that in an open-loop Nash equilibrium if agents strongly admire the consumption of others. This result is irrelevant to whether preferences exhibit “keeping up with the Joneses” or “running away from the Joneses”.

Differential games Consumption externalities Endogenous growth Open-loop Nash equilibrium Feedback Nash equilibrium 

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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Institute of Economic ResearchKyoto UniversityKyotoJapan

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