Symmetric equilibria in stochastic timing games
Jan-Henrik Steg ()
No 543, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University
We construct subgame-perfect equilibria with mixed strategies for symmetric stochastic timing games with arbitrary strategic incentives. The strategies are qualitatively different for local first- or second-mover advantages, which we analyse in turn. When there is a local second-mover advantage, the players may conduct a war of attrition with stopping rates that we characterize in terms of the Snell envelope from the general theory of optimal stopping, which is very general but provides a clear interpretation. With a local first-mover advantage, stopping typically results from preemption and is abrupt. Equilibria may differ in the degree of preemption, precisely at which points it is triggered. We provide an algorithm to characterize where preemption is inevitable and to establish the existence of corresponding payoff-maximal symmetric equilibria.
Keywords: Stochastic timing games; mixed strategies; subgame perfect equilibrium; Snell envelope; optimal stopping (search for similar items in EconPapers)
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https://pub.uni-bielefeld.de/download/2763830/2763831 First Version, 2015 (application/pdf)
Working Paper: Symmetric Equilibria in Stochastic Timing Games (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:543
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