Relaxation algorithms to find Nash equilibria with economic applications |
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Authors: | Jacek B Krawczyk Stanislav Uryasev |
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Institution: | (1) Commerce and Administration Faculty, Victoria University of Wellington, PO Box 600, Wellington, New Zealand;(2) Department of Industrial and Systems Engineering, University of Florida, 474 Weil Hall, Gainesville, FL 32611-6595, USA |
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Abstract: | Recent theoretical studies have shown that a relaxation algorithm can be used to find noncooperative equilibria of synchronous
infinite games with nonlinear payoff functions and coupled constraints. In this study, we introduce an improvement to the
algorithm, such as the steepest-descent step-size control, for which the convergence of the algorithm is proved. The algorithm
is then tested on several economic applications. In particular, a River Basin Pollution problem is considered where coupled
environmental constraints are crucial for the relevant model definition. Numerical runs demonstrate fast convergence of the
algorithm for a wide range of parameters.
This revised version was published online in July 2006 with corrections to the Cover Date. |
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Keywords: | computational economics Nash equilibrium coupled constraints relaxation algorithm |
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