Revisiting Dynamic Duopoly model: Implementing the Model using Software Python

Purpose – Duopoly model in static and dynamic sense is represented in this paper, implementing the solutions with Python code. The static duopoly model has been represented finding Nash equilibrium solution and also subgame perfect equilibrium called Stackelberg solution. Research design, data and methodology -The dynamic duopoly model has been revisited in the framework of LQ control problems. Using this framework, this paper has facilitated computing procedures of this model. Following some literature (for example, Ljungvist and Sagent (2018), Hansen and Sargent (2008), Hernandez-Lerma and Lasserre (1996)) around this topic, we have outlined some essence of this technique of LQ control problems: Under this framework, computing procedures have been facilitated, displaying Python code to implement computationally. Result – Markov Perfect Equilibrium (MPE) is considered, the concept of which is essential in modern micro economics. The Stackelberg equilibrium of this model has been explored: Solution procedures computing Stackelberg equilibrium are confined within the LQ control framework. This paper has also applied these procedures to RAMSEY problem of setting optimal money supply decision rules. Conclusion -Understanding the full structure of LQ problems is crucial in solving real economic problems. This paper may motivate some researchers including graduate studnets in a natural or social science to apply this technique to real world problems.