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Charon_22841800_2023.pdf
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- This study focuses on proposing policies for regions within a dynamic coalition setup based on NEG assumptions. It contributes to the NEG literature by tweaking transportation costs dynamically to mirror diplomatic relations between regions, symbolizing cooperation or opposition. Using a game theory approach is a fresh angle, and there's room to fine-tune parameters for results closer to real-world observations. The motivation stems from the preliminary work of Delloye and Tharakan (2018), which introduced individual preferences and unpredictable dynamics in the footloose entrepreneur model. To account for dynamic responses to policy designs, a game theory framework was needed. Optimizing one's payoff without considering rational responses from others only makes sense when others aren't smart or their actions don't matter. In this analysis, tools and methods were crafted to understand dynamics and suggest relevant policies. This involved a parameter check to grasp their impact, a look at initial conditions that matter, and a study of equilibrium shifts considering individual preferences as noise. These helped decide where the smallest player should ally to maximize their share over time. The policy recommendation is that the weaker player should team up with the dominant one to avoid extinction or join forces with the third player if there's a chance of survival. Other findings include the negligible importance of solving wage equations and how higher transportation costs lower overall welfare. Lastly, we explored how the trade-off between parameters H and Δφ affects the transition zone between coalition success and failure for weaker players. Future work could include adding bargaining to the game theory model during coalition formation. This would make policy recommendations more appealing for the weaker region. This study sets the stage for refining policy frameworks and understanding dynamic economic interactions, especially in evolutionary games with uncertainties, applied to the footloose entrepreneur model.