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Markov Perfect Equilibria in Differential Games with Regime Switching Strategies

Author

Listed:
  • Ngo Van Long
  • Fabien Prieur
  • Klarizze Puzon
  • Mabel Tidball
Abstract
We propose a new methodology exploring Markov perfect equilibrium strategies in differential games with regime switching. Specifically, we develop a general game with two players having two kinds of strategies. Players choose an action that inuences the evolution of a state variable, and decide on the switching time from one regime to another. Compared to the optimal control problem with regime switching, necessary optimaliity conditions are modified for the first-mover. When choosing her optimal switching strategy, this player considers the impact of her choice on the other player's actions and payoffs. In order to determine the equilibrium timing of regime changes, the notion of wrong timing is introduced and necessary conditions for a particular timing to be wrong are derived.[...]

Suggested Citation

  • Ngo Van Long & Fabien Prieur & Klarizze Puzon & Mabel Tidball, 2013. "Markov Perfect Equilibria in Differential Games with Regime Switching Strategies," Working Papers 13-06, LAMETA, Universtiy of Montpellier, revised Jan 2014.
    • Handle: RePEc:lam:wpaper:13-06
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    File URL: http://www.lameta.univ-montp1.fr/Documents/DR2013-06.pdf
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    References listed on IDEAS

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    1. Raouf Boucekkine & Aude Pommeret & Fabien Prieur, 2013. "Technological vs. Ecological Switch and the Environmental Kuznets Curve," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 252-260.
    2. Boucekkine, R. & Pommeret, A. & Prieur, F., 2013. "Optimal regime switching and threshold effects," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2979-2997.
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    4. Raouf Boucekkine & Aude Pommeret & Fabien Prieur, 2012. "Optimal Regime Switching and Threshold Effects: Theory and Application to a Resource Extraction Problem under Irreversibility," Working Papers halshs-00793200, HAL.
    5. Prieur, Fabien & Tidball, Mabel & Withagen, Cees, 2013. "Optimal emission-extraction policy in a world of scarcity and irreversibility," Resource and Energy Economics, Elsevier, vol. 35(4), pages 637-658.
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    Cited by:

    1. Raouf Boucekkine & Fabien Prieur & Klarizze Puzon, 2014. "On the Timing of Political Regime Changes: Theory and Application to the Arab Spring," Working Papers 2014.104, Fondazione Eni Enrico Mattei.
    2. Dmitry Gromov & Ekaterina Gromova, 2017. "On a Class of Hybrid Differential Games," Dynamic Games and Applications, Springer, vol. 7(2), pages 266-288, June.

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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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