On preemption in discrete and continuous time

Jan-Henrik Steg (jsteg@uni-bielefeld.de)

No 556, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: The seminal work of Fudenberg and Tirole (1985) on how preemption erodes the value of an option to wait raises general questions about the relation between models in discrete and continuous time and thus about the interpretation of its central result, relying on an “infinitely fine grid†. Here it is shown that the preemption equilibrium is the limit of the unique symmetric equilibria of the game when reduced to any sequence of grids becoming infinitely fine. Furthermore, additional subgame perfect equilibria using conventional continuous-time mixed strategies are identified.

Keywords: Preemption; discrete time; continuous time; subgame perfect equilibrium; convergence (search for similar items in EconPapers)
Pages: 16
Date: 2016-04-11
New Economics Papers: this item is included in nep-hpe and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://pub.uni-bielefeld.de/download/2902223/2902224 First Version, 2016 (application/x-download)

Related works:
Journal Article: On Preemption in Discrete and Continuous Time (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:556

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