Dynkin games with incomplete and asymmetric information

Tiziano De Angelis, Erik Ekstr\"om and Kristoffer Glover

Papers from arXiv.org

Abstract: We study the value and the optimal strategies for a two-player zero-sum optimal stopping game with incomplete and asymmetric information. In our Bayesian set-up, the drift of the underlying diffusion process is unknown to one player (incomplete information feature), but known to the other one (asymmetric information feature). We formulate the problem and reduce it to a fully Markovian setup where the uninformed player optimises over stopping times and the informed one uses randomised stopping times in order to hide their informational advantage. Then we provide a general verification result which allows us to find the value of the game and players' optimal strategies by solving suitable quasi-variational inequalities with some non-standard constraints. Finally, we study an example with linear payoffs, in which an explicit solution of the corresponding quasi-variational inequalities can be obtained.

Date: 2018-10, Revised 2020-07
New Economics Papers: this item is included in nep-gth and nep-mic
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Dynkin Games with Incomplete and Asymmetric Information (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1810.07674

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