Markov Perfect Equilibria in Multi-Mode Differential Games with Endogenous Timing of Mode Transitions

Herbert Dawid () and Serhat Gezer
Additional contact information
Herbert Dawid: Bielefeld University
Serhat Gezer: Bielefeld University

Dynamic Games and Applications, 2022, vol. 12, issue 2, No 3, 363-393

Abstract: Abstract We study Markov perfect equilibria (MPE) of two-player multi-mode differential games with controlled state dynamics, where one player controls the transition between modes. Different types of MPE are characterized distinguishing between delay equilibria, inducing for some initial conditions mode switches after a positive finite delay, and now or never equilibria, under which, depending on the initial condition, a mode switch occurs immediately or never. These results are applied to analyze the MPE of a game capturing the dynamic interaction between two incumbent firms among which one has to decide when to extend its product range by introducing a new product. The market appeal of the new product can be influenced over time by both firms through costly investments. Under a wide range of market introduction costs a now or never equilibrium coexists with a continuum of delay equilibria, each of them inducing a different time of product introduction.

Keywords: Multi-mode differential games; Markov perfect equilibrium; Product innovation; Optimal timing (search for similar items in EconPapers)
JEL-codes: C73 L13 O31 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s13235-021-00408-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:dyngam:v:12:y:2022:i:2:d:10.1007_s13235-021-00408-w

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13235

DOI: 10.1007/s13235-021-00408-w

Access Statistics for this article

Dynamic Games and Applications is currently edited by Georges Zaccour

More articles in Dynamic Games and Applications from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().