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

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Author Info

  • Dutta, P.K.
  • Rustichini, A.

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

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 263.

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Length: 22 pages
Date of creation: 1991
Date of revision:
Handle: RePEc:roc:rocher:263

Contact details of provider:
Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

Related research

Keywords: game theory ; economic equilibrium ; economic models;

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Cited by:
  1. Weeds, Helen, 2002. "Strategic Delay in a Real Options Model of R&D Competition," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 729-47, July.
  2. Smirnov, Vladimir & Wait, Andrew, 2013. "Innovation in a generalized timing game," Working Papers 2013-16, University of Sydney, School of Economics.
  3. 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.
  4. Ronnie J. Phillips & David Nickerson, 2011. "Underwriting in Property-Casualty Insurance Markets: Regulation, Risk and Volatility," NFI Working Papers 2011-WP-19, Indiana State University, Scott College of Business, Networks Financial Institute.
  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. Bobtcheff, Catherine & Mariotti, Thomas, 2012. "Potential competition in preemption games," Games and Economic Behavior, Elsevier, vol. 75(1), pages 53-66.
  7. 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.
  8. Décamps, Jean-Paul & Mariotti, Thomas, 2000. "Irreversible Investment and Learning Externalities," IDEI Working Papers 97, Institut d'Économie Industrielle (IDEI), Toulouse.
  9. 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.

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