Dynamic games in management science with interest rate uncertainty

Dynamic games in management science with interest rate uncertainty

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Article ID: iaor20082733
Country: Netherlands
Volume: 4
Issue: 2
Start Page Number: 205
End Page Number: 225
Publication Date: Apr 2007
Journal: Computational Management Science
Authors:
Abstract:

This paper incorporates interest rate uncertainty in differential games applied in management science. A solution mechanism for games with uncertain interest rates is developed, and a novel characterizing the solution is established. This is the first time differential games with uncertain interest rates are developed and solved. An application in commercial resource extraction is provided. In particular, the impact of interest rate variations on the value of the firm is presented in a dynamic game framework. Numerical illustrations and computer generated results are presented. The analysis is also extended to cases with stochastic dynamics.

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