Optimal switching from cooperation to competition: a preliminary exploration
Raouf Boucekkine  1@  , Carmen Camacho  2@  , Benteng Zou  3, *@  
1 : Aix-Marseille University
Aix-Marseille University, Aix-Marseille School of Economics
2 : Paris School of Economics and CNRS
Paris School of Economics and CNRS
3 : University of Luxembourg
* : Corresponding author

Existing literature considers more often merging or collation under different circumstances. Few efforts were made to investigate the optimal condition of separation. This study is trying to fill in this gap. Furthermore, many economic and operational research studies have analysed the optimal timing of switching between different regimes. Most of these studies focus on the situation of the same decision maker in different regimes. In this paper, via differential game, we first notice that the classical multiple stage optimal regime switching condition obtained via Maximum principle is no longer working due to the decision makers changed before and after the separation. Thus, there may be different choices because of shortage of transversality condition between different periods. Dynamic programming does not depend on this kind of trasnversality condition, and can provide the optimal time of separation from an international agreement or treaty. Nonetheless, the optimal switching time depends essentially on the choice of strategic space after separation.


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