Subgame-Perfect Equilibria in Stochastic Timing Games

Arbeitspapier

We introduce a notion of subgames for stochastic timing games and the related notion of subgame-perfect equilibrium in possibly mixed strategies. While a good notion of subgame-perfect equilibrium for continuous-time games is not available in general, we argue that our model is the appropriate version for timing games. We show that the notion coincides with the usual one for discrete-time games. Many timing games in continuous time have only equilibria in mixed strategies - in particular preemption games, which often occur in the strategic real option literature. We provide a sound foundation for some workhorse equilibria of that literature, which has been lacking as we show. We obtain a general constructive existence result for subgame-perfect equilibria in preemption games and illustrate our findings by several explicit applications.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Center for Mathematical Economics Working Papers ; No. 524

Classification and Topics

• Classification: Wirtschaft ; Optimization Techniques; Programming Models; Dynamic Analysis ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Firm Behavior: Theory ; Monopoly; Monopolization Strategies
• Subject: timing games ; stochastic games ; mixed strategies ; subgame-perfect equilibrium in continuous time ; optimal stopping

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Riedel, Frank ; Steg, Jan-Henrik
• Event: Veröffentlichung
• (who): Bielefeld University, Center for Mathematical Economics (IMW)
• (where): Bielefeld
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/103936
• Last update: 10.03.2025, 11:43 AM CET