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On dividend strategies with non-exponential discounting

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  • Zhao, Qian
  • Wei, Jiaqin
  • Wang, Rongming

Abstract

In this paper, we study the dividend maximization problem with a non-constant discount rate in a diffusion risk model. We assume that the dividends can only be paid at a bounded rate and restrict ourselves to Markov strategies. This is a time inconsistent control problem. The equilibrium HJB-equation is given and the verification theorem is proven for a general discount function. Considering a mixture of exponential discount functions and a pseudo-exponential discount function, we get equilibrium dividend strategies and the corresponding equilibrium value functions by solving the equilibrium HJB-equations.

Suggested Citation

  • Zhao, Qian & Wei, Jiaqin & Wang, Rongming, 2014. "On dividend strategies with non-exponential discounting," Insurance: Mathematics and Economics, Elsevier, vol. 58(C), pages 1-13.
    • Handle: RePEc:eee:insuma:v:58:y:2014:i:c:p:1-13
    DOI: 10.1016/j.insmatheco.2014.06.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Timothy Hillman & Nan Zhang & Zhuo Jin, 2018. "Real-Option Valuation in a Finite-Time, Incomplete Market with Jump Diffusion and Investor-Utility Inflation," Risks, MDPI, vol. 6(2), pages 1-20, May.
    2. Yongwu Li & Zhongfei Li & Yan Zeng, 2016. "Equilibrium Dividend Strategy with Non-exponential Discounting in a Dual Model," Journal of Optimization Theory and Applications, Springer, vol. 168(2), pages 699-722, February.
    3. Chen, Shumin & Zeng, Yan & Hao, Zhifeng, 2017. "Optimal dividend strategies with time-inconsistent preferences and transaction costs in the Cramér–Lundberg model," Insurance: Mathematics and Economics, Elsevier, vol. 74(C), pages 31-45.
    4. Zhou, Zhou & Jin, Zhuo, 2020. "Optimal equilibrium barrier strategies for time-inconsistent dividend problems in discrete time," Insurance: Mathematics and Economics, Elsevier, vol. 94(C), pages 100-108.
    5. Chen, Shumin & Wang, Xi & Deng, Yinglu & Zeng, Yan, 2016. "Optimal dividend-financing strategies in a dual risk model with time-inconsistent preferences," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 27-37.
    6. Soren Christensen & Kristoffer Lindensjo, 2019. "Moment constrained optimal dividends: precommitment \& consistent planning," Papers 1909.10749, arXiv.org.

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