Local Time Pushed Mixed Equilibrium Strategies for Time-Inconsistent Stopping Problems

• We consider the game-theoretic approach to time-inconsistent stopping of a onedimensional diffusion where the time-inconsistency is due to the presence of a nonexponential (weighted) discount function. In particular, we study (weak) equilibria for this problem in a novel class of mixed (i.e., randomized) stopping times based on a local time construction of the stopping intensity. For a general formulation of the problem we provide a verification theorem giving sufficient conditions for mixed (and pure) equilibria in terms of a set of variational inequalities, including a smooth fit condition. We apply the theory to prove the existence of (mixed) equilibria in a recently studied real options problem in which no pure equilibria exist.

Ämnesord

TEKNIK OCH TEKNOLOGIER  -- Elektroteknik och elektronik (hsv//swe)

ENGINEERING AND TECHNOLOGY  -- Electrical Engineering, Electronic Engineering, Information Engineering (hsv//eng)

NATURVETENSKAP  -- Matematik (hsv//swe)

NATURAL SCIENCES  -- Mathematics (hsv//eng)

Nyckelord

time -inconsistent stopping

randomized/mixed stopping times

stochastic dynamic

Publikations- och innehållstyp

ref (ämneskategori)

art (ämneskategori)