Groupe d’études et de recherche en analyse des décisions

G-84-16

On the Dominance of Capitalists Leadership in a "Feedback-Stackelberg" Solution of a Differential Game Model of Capitalism

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This paper deals with a modified version of the Lancaster model of capitalism, where it is assumed that there is a cost jointly beared by the two groups of players (workers vs capitalists) and associated with the bargaining of a larger share of consumption for the workers. It is shown that a Feedback-Stackelberg solution, with the capitalists acting as leaders and announcing their investment policy at the beginning of each period, is a solution dominating the Feedback-Nash solution.

The paper is also intended to be a tutorial on the Feedback-Stackelberg solution, a concept not so often used by economic modelers.

, 35 pages