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Published in:
2021 | OriginalPaper | Chapter
23. Time-Inconsistent Stopping in Discrete Time
Authors : Tomas Björk, Mariana Khapko, Agatha Murgoci
Published in: Time-Inconsistent Control Theory with Finance Applications
Publisher: Springer International Publishing
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Abstract
We now go on to study a class of time-inconsistent stopping problems in discrete time. We start by defining the concepts of Markovian stopping strategies and subgame-perfect Nash equilibrium stopping strategies. Following similar steps to those in the control case, we then proceed to derive an extension of the standard Wald–Bellman equation to a non-standard extended system that allows for the determination of the equilibrium value function and the equilibrium stopping strategy. Examples studied at the end of the chapter include a time-inconsistent version of a simple secretary problem and a procrastination problem for a time-inconsistent agent who decides when to complete a task.