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Interactions between government and firms: a differential game approach

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Abstract

In this paper we study an extended version of the model described in Gradus (J. Econ. 81:1092–1109, 1989) in order to determine the optimal taxation policy of a government and its effects on the stock of capital goods growth as a result of the activity developed by firms. It is shown that, by introducing a wealth tax, there exists an optimal wealth tax rate for which the open-loop/feedback Nash/Stackelberg equilibria coincide, maximizing the payments for both agents (government and firms), so that the open-loop Stackelberg equilibrium becomes both time consistent and subgame perfect.

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Author information

Authors and Affiliations

  1. Dept. Matemàtica econòmica, financera i actuarial, Universitat de Barcelona, Avda. Diagonal 690, 08034, Barcelona, Spain

    Jorge Navas & Jesús Marín-Solano

Authors
  1. Jorge Navas
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  2. Jesús Marín-Solano
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Corresponding author

Correspondence to Jorge Navas.

Additional information

Partially supported by MEC (Spain) Grants MTM2006-13468, BMF2002-03493 and project ‘Ingenio Mathematica (i-MATH)’ No. CSD2006-00032 (Consolider-Ingenio 2010).

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Navas, J., Marín-Solano, J. Interactions between government and firms: a differential game approach. Ann Oper Res 158, 47–61 (2008). https://doi.org/10.1007/s10479-007-0248-3

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  • DOI: https://doi.org/10.1007/s10479-007-0248-3

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