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A Theory of Stopping Time Games with Applications to Product Innovations and Asset Sales

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  • Dutta, Prajit K
  • Rustichini, Aldo

Abstract

In this paper, the pure strategy sub game perfect equilibria of a general class of stopping time games are studied. It is shown that there always exists a natural class of Markov Perfect Equilibria, called stopping equilibria. Such equilibria can be computed as a solution of a single agent stopping time problem, rather than of a fixed point problem. A complete characterization of stopping equilibria is presented. Conditions are given under which the outcomes of such equilibria span the set of all possible outcomes from perfect equilibria. Two economic applications of the theory, product innovations and the timing of asset sales, are discussed.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 3 (1993)
Issue (Month): 4 (October)
Pages: 743-63

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Handle: RePEc:spr:joecth:v:3:y:1993:i:4:p:743-63

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Cited by:
  1. Bobtcheff, Catherine & Mariotti, Thomas, 2012. "Potential competition in preemption games," Games and Economic Behavior, Elsevier, vol. 75(1), pages 53-66.
  2. Helen Weeds, 2002. "Strategic Delay in a Real Options Model of R&D Competition," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 729-747.
  3. Décamps, Jean-Paul & Mariotti, Thomas, 2000. "Irreversible Investment and Learning Externalities," IDEI Working Papers 97, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Zhang, Heng & Yang, Ming & Bao, Jiye & Gong, Pu, 2013. "Competitive investing equilibrium under a procurement mechanism," Economic Modelling, Elsevier, vol. 31(C), pages 734-738.
  5. Dutta, Prajit K & Lach, Saul & Rustichini, Aldo, 1995. "Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 563-89, Winter.
  6. Flavia Cortelezzi & Giovanni Villani, 2007. "Strategic Technology Adoption and Market Dynamics as Option Games," Quaderni DSEMS 14-2007, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
  7. Smirnov, Vladimir & Wait, Andrew, 2013. "Innovation in a generalized timing game," Working Papers 2013-16, University of Sydney, School of Economics.
  8. Regibeau, Pierre & Rockett, Katherine E., 1996. "The timing of product introduction and the credibility of compatibility decisions," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 801-823, October.

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