Optimal stopping with private information

Thomas Kruse and Philipp Strack ()

Journal of Economic Theory, 2015, vol. 159, issue PB, 702-727

Abstract: Many economic situations are modeled as stopping problems. Examples include job search, timing of market entry decisions, irreversible investment or the pricing of American options. This paper analyzes optimal stopping as a mechanism design problem with transfers. We show that under a dynamic single crossing condition a stopping rule can be implemented by a transfer that only depends on the realized stopping decision if and only if it is a cut-off rule. We characterize the transfer implementing a given stopping rule using a novel technique based on constrained stochastic processes.

Keywords: Dynamic mechanism design; Optimal stopping; Dynamic implementability; Posted-price mechanism (search for similar items in EconPapers)
JEL-codes: C61 D82 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:159:y:2015:i:pb:p:702-727

DOI: 10.1016/j.jet.2015.03.001

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