Preemption games under Levy uncertainty

• 成果类型: Article
• 署名作者: Boyarchenko, Svetlana; Levendorskii, Sergei
• 署名单位: University of Texas System; University of Texas Austin; University of Leicester
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2014.10.010
• 发表日期: 2014
• 页码: 354-380
• 关键词: Stopping time games; preemption; Levy uncertainty

摘要

We study a stochastic version of Fudenberg-Tirole's preemption game. Two firms contemplate entering a new market with stochastic demand. Firms differ in sunk costs of entry. If the demand process has no upward jumps, the low cost firm enters first, and the high cost firm follows. If leader's optimization problem has an interior solution, the leader enters at the optimal threshold of a monopolist; otherwise, the leader enters earlier than the monopolist. If the demand admits positive jumps, then the optimal entry threshold of the leader can be lower than the monopolist's threshold even if the solution is interior; simultaneous entry can happen either as an equilibrium or a coordination failure; the high cost firm can become the leader. We characterize subgame perfect equilibrium strategies in terms of stopping times and value functions. Analytical expressions for the value functions and thresholds that define stopping times are derived. (C) 2014 Elsevier Inc. All rights reserved.