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1997 Documento de Trabajo #24

Limit Policies in N-Sector Dynamic Growth Games with Externalities

We examine an economy with n production sectors that interact via a production externality. We find a solution to the resulting dynamic differential game between sectors and compare it to the cooperative solution. As the number of sectors increases, the limiting policy is the optimal policy without a production externality. This policy is inefficient and, depending on the sign of the externality between sectors, the inefficiency is due to over- (or under-) consumption.

Ronald Fischer
Leonard J. Mirman

Publicado en: Journal of Applied Mathematics and Decision Sciences, Vol. 1, Nº2, pp. 81-87, 1997.