Location of Repository

Dynamic Stackelberg Game with Risk-Averse Players: Optimal Risk-Sharing under Asymmetric Information

By Dan Protopopescu


The objective of this paper is to clarify the interactive nature of the leader-follower relationship when both players are endogenously risk-averse. The analysis is placed in the context of a dynamic closed-loop Stackelberg game with private information. The case of a risk-neutral leader, very often discussed in the literature, is only a borderline possibility in the present study. Each player in the game is characterized by a risk-averse type which is unknown to his opponent. The goal of the leader is to implement an optimal incentive compatible risk-sharing contract. The proposed approach provides a qualitative analysis of adaptive risk behavior profiles for asymmetrically informed players in the context of dynamic strategic interactions modelled as incentive Stackelberg games.Dynamic stochastic Stackelberg game, optimal path, closed-loop control, endogenous risk-aversion, adaptive risk management, optimal risk-sharing.

OAI identifier: oai:RePEc:aub:autbar:797.09

Suggested articles



  1. (1988). A consistent closed-loop solution for infinite-horizon linear-quadratic dynamic Stackelberg games”,
  2. A m b l e r ,S . ,a n dA .P a q u e t
  3. (1993). A Theory of Incentives in Procurement and Regulation”. The MIT Press,C a m b r i d g e ,M a s s a c h u s e t t s .
  4. (1973). Additional aspects of the Stackelberg strategy in nonzero-sum games”,
  5. (2002). An anticipative feedback solution for the infinite-horizon linear-quadratic dynamic Stackelebrg game”,
  6. (2002). An approach to discrete-time incentive feedback Stackelberg games”,
  7. (2005). An environmental game with coupling constraints”,
  8. (1995). Characteristics of decisions in decision analysis practice”,
  9. (1981). Closed-loop Stackelberg solution to a multistage linear-quadratic game”,
  10. (1978). Closed-loop Stackelberg strategies in linear-quadratic problems”,
  11. (1979). Closed-loop Stackelberg strategies with applications in the optimal control of multilevel systems”,
  12. (1998). Contracting for Nonpoint-Source Pollution Abatement”,
  13. (1995). Control and Game-Theoretic Models of the Environment,
  14. (1995). Controlling a dam Environmentally acceptable standards through the use of a decision support tool”,
  15. (1994). Controlling environmental externality: observability and optimal policy rules”, Dortrecht,
  16. (1992). Determinants of contract durations in collective bargaining agreements”,
  17. (2008). Dynamic feedback Stackelberg games with non-unique solution”, Nonlinear Analysis: Theory,
  18. (1985). Dynamic Games and the Time Inconsistency of
  19. (1985). Economic policy with bounded controls”,
  20. (1992). Environmental Policy Design and Dynamic Non-point Source Pollution”,
  21. (1991). Environmental Policy under Imperfect Information”,
  22. (1962). Equilibrium in a Reinsurance Market”,
  23. (1950). Equilibrium points in n-person games”,
  24. (1977). Equilibrium solutions in dynamic dominant-player models”,
  25. (2008). Game theory and policymaking in natural resources and the environment, Routledge (London - GBR),
  26. (1997). Game Theory: Analysis of Conflicts,
  27. (1988). How Should Control Theory be Used to Calculate a Time Consistent Government Policy”,
  28. (1989). I n flation uncertainty and contract duration”,
  29. (2007). Improving the Risk Concept: A Revision of Arrow-Pratt Theory in the Context of Controlled Dynamic Stochastic Environments”, Working Paper No.
  30. (2008). Incentive equilibrium in an overlapping-generations environmental game”,
  31. (1985). M a n a g e m e n t o f e ffluent discharges: a dynamic game model”, in Control and Game-Theoretic Models of Environment,
  32. (1909). Manuel d’ecoonomie politique, Qiard,
  33. (1934). Marketform und Gleichgewicht, Springer, Viena. An english translation appeared in 1952 entitled “The Theory of Market Economy”, Published by Oxford
  34. (1995). Negative externalities may cause delay in negotiation”,
  35. (1975). Non-cooperative and Dominant Player Solutions in Discrete Dynamic Games”,
  36. (1951). Non-cooperative games”,
  37. (1988). O n t h e T h e o r y o f I n finitely Repeated Games with Discounting”,
  38. (1973). On the Stackelberg strategy in nonzero-sum games”,
  39. (1987). Pollution Control and Collective Penalties”,
  40. (1984). Risk and Linear-Quadratic Stabilization”,
  41. (1977). Rules Rather than Discretion: The Inconsistency of Optimal Plans”,
  42. (1972). Stackelberg solution for two-person games with biased information patterns”,
  43. (1984). Stackelberg strategies in discrete linear quadratic problems”,
  44. (2006). Stackelberg strategy with closed-loop information structure for linear-quadratic games”,
  45. T e a g u e ,M .L . ,M a p p ,H .P .a n dD .J .B e r n a r d o
  46. (1986). T h eR e l a t i v eE fficiency of Agricultural Source Water Pollution Control Policies”,
  47. (1980). Team-optimal closed-loop Stackelberg strategies in hierarchical control problems”,
  48. (2003). The Principal-Agent Model: The Economic Theory of Incentives, Edward Edger Publishing limited,
  49. (1992). The Regulation of Nonpoint-Source Pollution under Imperfect and Asymmetric Information”,
  50. (2002). The Theory of Incentives: The Principal-Agent Model”, Princeton University Press,P r i n c e t o n ,N e wJ e r s e y .
  51. (1988). Uncertainty and Incentives for Nonpoint Pollution Control”,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.