On the Dividend Strategies with Non-Exponential Discounting

Qian Zhao, Jiaqin Wei and Rongming Wang

Papers from arXiv.org

Abstract: In this paper, we study the dividend strategies for a shareholder with non-constant discount rate in a diffusion risk model. We assume that the dividends can only be paid at a bounded rate and restrict ourselves to the Markov strategies. This is a time inconsistent control problem. The extended HJB equation is given and the verification theorem is proved for a general discount function. Considering the pseudo-exponential discount functions (Type I and Type II), we get the equilibrium dividend strategies and the equilibrium value functions by solving the extended HJB equations.

Date: 2013-04, Revised 2013-11
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