Markov Perfect Equilibria in Differential Games with Regime Switching Strategies

Ngo Long, Fabien Prieur, Klarizze Puzon and Mabel Tidball (mabel.tidball@supagro.fr)

Working Papers from LAMETA, Universtiy of Montpellier

Abstract: We propose a new methodology exploring Markov perfect equilibrium strategies in differential games with regime switching. Specifically, we develop a general game with two players having two kinds of strategies. Players choose an action that inuences the evolution of a state variable, and decide on the switching time from one regime to another. Compared to the optimal control problem with regime switching, necessary optimaliity conditions are modified for the first-mover. When choosing her optimal switching strategy, this player considers the impact of her choice on the other player's actions and payoffs. In order to determine the equilibrium timing of regime changes, the notion of wrong timing is introduced and necessary conditions for a particular timing to be wrong are derived.[...]

Pages: 30 pages
Date: 2013-03, Revised 2014-01
New Economics Papers: this item is included in nep-cwa, nep-gth, nep-hpe and nep-mic
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Markov Perfect Equilibria in Differential Games with Regime Switching Strategies (2014)
Working Paper: Markov Perfect Equilibria in Differential Games with Regime Switching Strategies (2014)
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