Dept Banner
Dept Banner

Seminars & Colloquia Calendar

Download as iCal file

Mathematical Finance and Probability Seminars

Optimal Equilibria for Time-inconsistency -- the Stopping Case

Yu-Jui Huang, University of Colorado

Location:  Hill 705
Date & time: Tuesday, 20 March 2018 at 11:40AM - 12:45PM


Abstract:  For time-inconsistent control/stopping problems, it is known that one should employ an equilibrium strategy, formulated in an intertemporal game between current and future selves. Such strategies, however, are not unique. This gives rise to two unsettled problems:

(i) How do we find all equilibria?

(ii) Among all equilibria, how do we select the appropriate one to use? For stopping problems under non-exponential discounting, we develop a new method, called the iterative approach, to resolve both (i) and (ii). First, we formulate equilibria as fixed points of an operator, which represents strategic reasoning that takes into account future selves' behavior. Under appropriate regularity conditions, every equilibrium can be found through a fixed-point iteration. When the state process is one-dimensional, we further establish the existence of an optimal equilibrium, which generates larger values than any other equilibrium does at all times. To the best of our knowledge, this is the first time a dominating subgame perfect Nash equilibrium is shown to exist in the literature of time-inconsistency. Our theory is illustrated explicitly in several real options models.

Special Note to All Travelers

Directions: map and driving directions. If you need information on public transportation, you may want to check the New Jersey Transit page.

Unfortunately, cancellations do occur from time to time. Feel free to call our department: 848-445-6969 before embarking on your journey. Thank you.

Contact Us

HillCenter small

Department of Mathematics

Department of Mathematics
Rutgers University
Hill Center - Busch Campus
110 Frelinghuysen Road
Piscataway, NJ 08854-8019, USA

Phone: +1.848.445.2390
Fax: +1.732.445.5530