# Nonzero-sum stochastic differential games between an impulse controller and a stopper

## TL;DR

This paper characterizes Nash equilibria in a nonzero-sum stochastic differential game involving impulse control and stopping, using a verification theorem and applying it to a Brownian motion model with explicit equilibrium strategies.

## Contribution

It introduces a new verification theorem for nonzero-sum impulse-stopping games and explicitly characterizes two types of threshold equilibria with analytical and numerical results.

## Key findings

- Two threshold-type Nash equilibria are fully characterized.
- Explicit semi-analytic expressions for strategies and payoffs are provided.
- Numerical analysis illustrates the qualitative properties of the equilibria.

## Abstract

We study a two-player nonzero-sum stochastic differential game where one player controls the state variable via additive impulses while the other player can stop the game at any time. The main goal of this work is characterize Nash equilibria through a verification theorem, which identifies a new system of quasi-variational inequalities whose solution gives equilibrium payoffs with the correspondent strategies. Moreover, we apply the verification theorem to a game with a one-dimensional state variable, evolving as a scaled Brownian motion, and with linear payoff and costs for both players. Two types of Nash equilibrium are fully characterized, i.e. semi-explicit expressions for the equilibrium strategies and associated payoffs are provided. Both equilibria are of threshold type: in one equilibrium players' intervention are not simultaneous, while in the other one the first player induces her competitor to stop the game. Finally, we provide some numerical results describing the qualitative properties of both types of equilibrium.