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Centre of Financial Mathematics Seminar Series
April 19, 2018 @ 1:30 pm - 2:30 pm
Dr. Zhou Zhou (School of Mathematics and Statistics, University of Sydney)
Optimal Equilibrium for Time-Inconsistent Stopping Problems
We study an infinite-horizon optimal stopping problem under non-exponential discounting. A new method, which we call the iterative approach, is developed to find subgame perfect Nash equilibriums. When the discount function induces decreasing impatience, we establish the existence of an equilibrium through fixed-point iterations. Moreover, we show that there exists a unique optimal equilibrium, which generates larger value 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.
Please let me know if you want to join the speaker for lunch at Expresso Warriors before the seminar at 12pm.