Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/149013 
Year of Publication: 
2016
Series/Report no.: 
Center for Mathematical Economics Working Papers No. 556
Publisher: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Abstract: 
The seminal work of Fudenberg and Tirole (1985) on how preemption erodes the value of an option to wait raises general questions about the relation between models in discrete and continuous time and thus about the interpretation of its central result, relying on an "infinitely fine grid". Here it is shown that the preemption equilibrium is the limit of the unique symmetric equilibria of the game when reduced to any sequence of grids becoming infinitely fine. Furthermore, additional subgame perfect equilibria using conventional continuous-time mixed strategies are identified.
Subjects: 
Preemption
discrete time
continuous time
subgame perfect equilibrium
convergence
JEL: 
C61
C73
D21
D43
L12
L13
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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