Equilibria in Continuous Time Preemption Games with Markovian Payoffs
AbstractThis paper studies timing games in continuous time where payoffs are stochastic and strongly Markovian. The main interest is in characterizing equilibria where players preempt each other along almost every sample path. It is found that the existence of such preemption equilibria depends crucially on whether there is a coordination mechanism that allows for rent equalization or not, and whether the stochastic payoffs admit upward jumps. Through numerical examples it is argued that the possibility of such coordination improves social welfare and that the welfare loss due to preemption decreases in uncertainty.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 11/17.
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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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Timing Games; Real Options; Preemption;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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