Equilibria in Continuous Time Preemption Games with Markovian Payoffs

Jacco Thijssen

Discussion Papers from Department of Economics, University of York

Abstract: This paper studies timing games in continuous time where payoffs are stochastic and strongly Markovian. The main interest is in characterizing equilibria where players preempt each other along almost every sample path. It is found that the existence of such preemption equilibria depends crucially on whether there is a coordination mechanism that allows for rent equalization or not, and whether the stochastic payoffs admit upward jumps. Through numerical examples it is argued that the possibility of such coordination improves social welfare and that the welfare loss due to preemption decreases in uncertainty.

Keywords: Timing Games; Real Options; Preemption (search for similar items in EconPapers)
JEL-codes: C73 D43 D81 (search for similar items in EconPapers)
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:11/17

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