Adjustment dynamics in network game with stochastic parameters

Olga N. Volkova, Darina A. Vologina, Alexey V. Korolev

National Research University Higher School of Economics at St. Petersburg

Abstract: In this paper, stochastic parameters are introduced into the network games model with production and knowledge's externalities. This model was formulated by V. Matveenko and A. Korolev and generalized two-period Romer model. Agents' productivities have deterministic and Wiener components. We consider the dynamics that occur when two complete networks are combined. Explicit expressions in the form of Brownian random processes are obtained. A qualitative analysis of the solution of a system of stochastic equations is carried out.

Keywords: network games, differential games, productivity, heterogeneous agents, stochastic differential equations, Brownian process.

UDC: 519.83, 519.86
BBK: 22.18

Received: 17.12.2020
Revised: 01.09.2021
Accepted: 10.12.2021