Playing with ghosts in a Dynkin game

Tiziano De Angelis and Erik Ekström

Stochastic Processes and their Applications, 2020, vol. 130, issue 10, 6133-6156

Abstract: We study a class of two-player optimal stopping games (Dynkin games) of preemption type, with uncertainty about the existence of competitors. The set-up is well-suited to model, for example, real options in the context of investors who do not want to publicly reveal their interest in a certain business opportunity. We show that if the underlying process is a Rd-valued, continuous, strong Markov process, and the stopping payoff is a continuous function (with mild integrability properties) there exists a Nash equilibrium in randomised stopping times for the game. Moreover, the equilibrium strategies and the expected payoffs of the two players are computed explicitly in terms of the corresponding one-player game. To the best of our knowledge this is the first paper to address this version of Dynkin games.

Keywords: Dynkin games; Uncertain competition; Randomised strategies; Nash equilibria; Reflecting strategies (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:spapps:v:130:y:2020:i:10:p:6133-6156

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DOI: 10.1016/j.spa.2020.05.005

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