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- Title
Optimal regulatory control of early contract termination.
- Authors
Evatt, G. W.; Johnson, P. V.; Duck, P. W.
- Abstract
We present a quantitative method to find jointly optimal strategies for an industry regulator and a firm who operate under exogenous uncertainty. The firm controls its operating policy in order to maximize its expected future profits whilst taking account of regulatory fines. The regulator aims to control the probability of the firm terminating production by imposing a closure fine which is as low as possible, while achieving the required reduction in probability. Our method determines the level of fine which establishes a Nash equilibrium in these non-zero-sum games under uncertainty.
- Subjects
OPTIMAL control theory; DISCHARGE of contracts; STRATEGIC planning; BUSINESS enterprises; PROFITABILITY; INDUSTRIAL productivity; NASH equilibrium
- Publication
IMA Journal of Management Mathematics, 2014, Vol 25, Issue 3, p313
- ISSN
1471-678X
- Publication type
Article
- DOI
10.1093/imaman/dpt010