Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103936
Authors: 
Riedel, Frank
Steg, Jan-Henrik
Year of Publication: 
2014
Series/Report no.: 
Working Papers, Center for Mathematical Economics 524
Abstract: 
We introduce a notion of subgames for stochastic timing games and the related notion of subgame-perfect equilibrium in possibly mixed strategies. While a good notion of subgame-perfect equilibrium for continuous-time games is not available in general, we argue that our model is the appropriate version for timing games. We show that the notion coincides with the usual one for discrete-time games. Many timing games in continuous time have only equilibria in mixed strategies - in particular preemption games, which often occur in the strategic real option literature. We provide a sound foundation for some workhorse equilibria of that literature, which has been lacking as we show. We obtain a general constructive existence result for subgame-perfect equilibria in preemption games and illustrate our findings by several explicit applications.
Subjects: 
timing games
stochastic games
mixed strategies
subgame-perfect equilibrium in continuous time
optimal stopping
JEL: 
C61
C73
D21
L12
Document Type: 
Working Paper

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