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An anticipative feedback solution for the infinite-horizon, linear-quadratic, dynamic, Stackelberg game. (English) Zbl 1100.91505

This paper derives and illustrates a new suboptimal-consistent feedback solution for an infinite-horizon, linear-quadratic, dynamic, Stackelberg game. This solution lies in the same solution space as the infinite-horizon, dynamic-programming, feedback solution but puts the leader in a preferred equilibrium position. The idea comes from F. Kydland [J. Econ. Theory 15, 307–324 (1977; Zbl 0375.90089)] who suggested deriving a consistent feedback solution for an infinite-horizon, linear-quadratic, dynamic, Stackelberg game by varying the coefficients in the player’s linear constant-coefficient decision rules. Here feedback is understood in the sense of setting a current control vector as a function of a predetermined state vector. The proposed solution is derived for discrete- and continuous-time games and is called the anticipative feedback solution. The solution is illustrated with a numerical example of a duopoly model.

MSC:

91A25 Dynamic games

Citations:

Zbl 0375.90089

Software:

minpack
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References:

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