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arXiv · 2310.09198

Equilibria for Time-inconsistent Singular Control Problems

Zongxia Liang·Xiaodong Luo·Fengyi Yuan
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Abstract

We study a time-inconsistent singular control problem originating from irreversible reinsurance decisions with non-exponential discount. A novel definition of equilibrium for time-inconsistent singular control problems is introduced. For the problem with non-exponential discount, both sufficient and necessary conditions are derived, providing a thorough mathematical characterization of the equilibrium. Specifically, the equilibrium can be characterized by an extended HJB system, which is a coupled system of non-local parabolic equations with free boundaries. Finally, by showing the existence of classical solutions to the extended HJB system, the existence of equilibria is established under some additional assumptions.

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Zongxia Liang, Xiaodong Luo, Fengyi Yuan. 2023-10-13. Equilibria for Time-inconsistent Singular Control Problems. https://arxiv.org/abs/2310.09198

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