A simple framework for investigating the properties of policy games

Abstract

The paper extensively studies the static model of non-cooperative linear quadratic games in which a set of agents chooses their instruments strategically to minimize their linear quadratic criterion. We first derive the necessary and sufficient conditions for the existence of a Nash equilibrium as well as for multiple equilibria to arise. Furthermore, we study the general condition for policy neutrality and Pareto efficiency of the equilibrium by introducing a new concept of decisiveness.Conflict of interest, Nash equilibrium existence, multiplicity, policy invariance, controllability, Pareto efficiency