[en] In this paper, we tackle a generic optimal regime switching problem where the decision
making process is not the same from a regime to another. Precisely, we consider a simple
model of optimal switching from competition to cooperation. To this end, we solve a twostage
optimal control problem. In the first stage, two players engage in a dynamic game
with a common state variable and one control for each player. We solve for open-loop
strategies with a linear state equation and linear-quadratic payoffs. More importantly, the
players may also consider the possibility to switch at finite time to a cooperative regime
with the associated joint optimization of the sum of the individual payoffs. Using theoretical
analysis and numerical exercises, we study the optimal switching strategy from
competition to cooperation. We also discuss the reverse switching.
Disciplines :
Méthodes quantitatives en économie & gestion
Auteur, co-auteur :
Boucekkine, Raouf
Camacho, Carmen
ZOU, Benteng ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Economics and Management (DEM)
Co-auteurs externes :
yes
Langue du document :
Anglais
Titre :
Optimal Switching from Competition to Cooperation: A Preliminary Exploration
Date de publication/diffusion :
2020
Titre de l'ouvrage principal :
Dynamic economic problems with regime switches
Auteur, co-auteur :
Haunschmied, Josef
Kovacevic, Raimund
Semmler, Willi
Veliov, Vladimir
Maison d'édition :
Springer
Collection et n° de collection :
Dynamic Modeling and Econometrics in Economics and Finance 25
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