In:
Mathematical Finance, Wiley, Vol. 31, No. 1 ( 2021-01), p. 508-530
Abstract:
A new notion of equilibrium, which we call strong equilibrium , is introduced for time‐inconsistent stopping problems in continuous time. Compared to the existing notions introduced in Huang, Y.‐J., & Nguyen‐Huu, A. (2018, Jan 01). Time‐consistent stopping under decreasing impatience. Finance and Stochastics , 22(1), 69–95 and Christensen, S., & Lindensjö, K. (2018). On finding equilibrium stopping times for time‐inconsistent markovian problems. SIAM Journal on Control and Optimization , 56(6), 4228–4255, which in this paper are called mild equilibrium and weak equilibrium , respectively, a strong equilibrium captures the idea of subgame perfect Nash equilibrium more accurately. When the state process is a continuous‐time Markov chain and the discount function is log subadditive, we show that an optimal mild equilibrium is always a strong equilibrium. Moreover, we provide a new iteration method that can directly construct an optimal mild equilibrium and thus also prove its existence.
Type of Medium:
Online Resource
ISSN:
0960-1627
,
1467-9965
Language:
English
Publisher:
Wiley
Publication Date:
2021
detail.hit.zdb_id:
1481288-5
SSG:
3,2
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