On feedback nash equilibrium and cooperation in the neoclassical growth model

Far away from any ideological point of view, our aim in this paper is to study, in a differential-game-theoretical approach, the standard growth model. Our baseline model comes from Kaitala y Pohjola (2009) based on the original ideas of Lancaster (1973). We focus on the computation of feedback strategies and we use history-dependent strategies, such as trigger strategies, in which to begin by cooperating and will cooperate as long as the rivals do, and upon observing a defection, it will immediately imply to revert to a period of punishment of specified length in which everyone plays non-cooperatively. We show that trigger strategies are employed by both groups to sustain cooperation as equilibrium. Then, we conclude that players’ memory strategies are the key for attaining the maximum economic growth.