Differential Games in Industrial Economics

A comprehensive and self-contained exposition of the applications of optimal control and differential game theory to industrial organisation and trade.

Differential game theory can be a very useful tool in industrial organisation. This volume revisits industrial economics using a dynamic approach to explain firms' strategies and their impact on the environment and trade flows. It will be of interest to researchers in economics, as well as advanced applications of game theory.Game theory has revolutionised our understanding of industrial organisation and the traditional theory of the firm. Despite these advances, industrial economists have tended to rely on a restricted set of tools from game theory, focusing on static and repeated games to analyse firm structure and behaviour. Luca Lambertini, a leading expert on the application of differential game theory to economics, argues that many dynamic phenomena in industrial organisation (such as monopoly, oligopoly, advertising, R&D races) can be better understood and analysed through the use of differential games. After illustrating the basic elements of the theory, Lambertini guides the reader through the main models, spanning from optimal control problems describing the behaviour of a monopolist through to oligopoly games in which firms' strategies include prices, quantities and investments. This approach will be of great value to students and researchers in economics and those interested in advanced applications of game theory.