On dividend strategies with non-exponential discounting |
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Affiliation: | 1. Department of Mathematics, Karlsruhe Institute of Technology, D-76128 Karlsruhe, Germany;2. Wrocław University of Technology, PL-50-370 Wrocław, Poland |
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Abstract: | In this paper, we study the dividend maximization problem with a non-constant discount rate in a diffusion risk model. We assume that the dividends can only be paid at a bounded rate and restrict ourselves to Markov strategies. This is a time inconsistent control problem. The equilibrium HJB-equation is given and the verification theorem is proven for a general discount function. Considering a mixture of exponential discount functions and a pseudo-exponential discount function, we get equilibrium dividend strategies and the corresponding equilibrium value functions by solving the equilibrium HJB-equations. |
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Keywords: | Dividend strategies Non-exponential discounting Time inconsistence Equilibrium strategies Equilibrium HJB-equation |
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