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Nash Equilibria for Dividend Distribution with Competition

Author

Listed:
  • Tiziano de Angelis

    (UNITO - Università degli studi di Torino = University of Turin)

  • Fabien Gensbittel

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Stéphane Villeneuve

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We construct Nash equilibria in feedback form for a class of two-person stochastic games of singular control with absorption, arising from a stylized model for corporate finance. More precisely, the paper focusses on a strategic dynamic game in which two financially-constrained firms operate in the same market. The firms distribute dividends and are faced with default risk. The strategic interaction arises from the fact that if one firm defaults, the other one becomes a monopolist and increases its profitability. The firms choose their dividend distribution policies from a class of randomised strategies and we identify two types of equilibria, depending on the firms' initial endowments. In both situations the optimal strategies and the equilibrium payoffs are found explicitly.

Suggested Citation

  • Tiziano de Angelis & Fabien Gensbittel & Stéphane Villeneuve, 2025. "Nash Equilibria for Dividend Distribution with Competition," Post-Print hal-05345639, HAL.
    • Handle: RePEc:hal:journl:hal-05345639
    DOI: 10.1287/moor.2023.0374
    Note: View the original document on HAL open archive server: https://hal.science/hal-05345639v1
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