Time-Inconsistent Stopping in Discrete Time

Tomas Bjork, Mariana Khapko () and Agatha Murgoci ()
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Mariana Khapko: University of Toronto
Agatha Murgoci: Ørsted

Chapter Chapter 23 in Time-Inconsistent Control Theory with Finance Applications, 2021, pp 239-254 from Springer

Abstract: Abstract We now go on to study a class of time-inconsistent stopping problems in discrete time. We start by defining the concepts of Markovian stopping strategies and subgame-perfect Nash equilibrium stopping strategies. Following similar steps to those in the control case, we then proceed to derive an extension of the standard Wald–Bellman equation to a non-standard extended system that allows for the determination of the equilibrium value function and the equilibrium stopping strategy. Examples studied at the end of the chapter include a time-inconsistent version of a simple secretary problem and a procrastination problem for a time-inconsistent agent who decides when to complete a task.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprfcp:978-3-030-81843-2_23

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DOI: 10.1007/978-3-030-81843-2_23

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