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on Game Theory |
| By: | Nicola Acocella (University of Rome I); Giovanni Di Bartolomeo (University of Rome I) |
| Abstract: | In the last 20 years issues of policy effectiveness and neutrality (notably with reference to monetary policy) have been increasingly raised in the context of static LQ (linear-quadratic) policy games. The general conditions ensuring policy non-neutrality in a strategic environment remains however to be inquired. We state these conditions by generalizing the classical theory of economic policy developed by Tinbergen and others to such a context. We also state necessary and sufficient conditions for the existence of Nash and Stackelberg equilibria. We finally show that the conditions for monetary policy effectiveness asserted in the literature respect our general conditions. |
| Keywords: | LQ-policy games, policy ineffectiveness, static controllability |
| JEL: | C72 E52 E61 |
| Date: | 2005–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504034&r=gth |
| By: | Nicola Acocella (University of Rome I); Giovanni Di Bartolomeo (University of Rome I) |
| Abstract: | Issues of policy effectiveness and neutrality are widespread in the economic literature. They have been increasingly raised in specific contexts within the class of LQ (linear-quadratic) policy games in the last 20 years, notably with reference to monetary policy. The more general conditions ensuring nonneutrality in a strategic environment remain however to be inquired. We fill this gap by applying the classical theory of economic policy to a strategic context. This is also useful to highlight some existence conditions for policy game solutions. We restrict ourselves to the common LQ-games in a static perfect information framework, but our simple logic can be extended to other more general situations. |
| Keywords: | LQ-policy games, policy ineffectiveness, controllability. |
| JEL: | C72 E52 E61 |
| Date: | 2005–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504035&r=gth |
| By: | Nicola Acocella (University of Rome I); Giovanni Di Bartolomeo (University of Rome I) |
| Abstract: | This paper generalizes the classical theory of economic policy developed by Tinbergen and Theil to a static LQ-strategic context between n players. We show how this generalized version of controllability can profitably be used to deal with policy ineffectiveness issues and Nash equilibrium existence. |
| Keywords: | Policy games, policy ineffectiveness, static controllability, Nash equilibrium existence. |
| JEL: | C72 E52 E61 |
| Date: | 2005–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504036&r=gth |