Backward-forward linear-quadratic mean-field games with major and minor agents

Jianhui Huang; Shujun Wang; Zhen Wu

doi:10.1186/s41546-016-0009-9

Article Contents

2016, Volume 1: 8. Doi: 10.1186/s41546-016-0009-9

This volume Previous Article A branching particle system approximation for a class of FBSDEs Next Article Linear quadratic optimal control of conditional McKean-Vlasov equation with random coefficients and applications

Backward-forward linear-quadratic mean-field games with major and minor agents

1 Department of Applied Mathematics, The Hong Kong Polytechnic University, Hong kong, China;
2 School of Mathematics, Shandong University, 250100 Jinan, China

Jianhui Huang, majhuang@polyu.edu.hk ; Shujun Wang, wuzhen@sdu.edu.cn ; Zhen Wu, wangshujunsdu@163.com

Received: April 03, 2016

Revised: September 11, 2016

Published: September 2020

support partly by RGC Grant 502412, 15300514, G-YL04. Z. Wu acknowledges the Natural Science Foundation of China (61573217), 111 project (B12023), the National High-level personnel of special support program and the Chang Jiang Scholar Program of Chinese Education Ministry.

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Abstract

This paper studies the backward-forward linear-quadratic-Gaussian (LQG) games with major and minor agents (players). The state of major agent follows a linear backward stochastic differential equation (BSDE) and the states of minor agents are governed by linear forward stochastic differential equations (SDEs). The major agent is dominating as its state enters those of minor agents. On the other hand, all minor agents are individually negligible but their state-average affects the cost functional of major agent. The mean-field game in such backward-major and forward-minor setup is formulated to analyze the decentralized strategies. We first derive the consistency condition via an auxiliary mean-field SDEs and a 3×2 mixed backward-forward stochastic differential equation (BFSDE) system. Next, we discuss the wellposedness of such BFSDE system by virtue of the monotonicity method. Consequently, we obtain the decentralized strategies for major and minor agents which are proved to satisfy the ∊-Nash equilibrium property.

Keywords:

Backward-forward stochastic differential equation (BFSDE),
Consistency condition,
∊-Nash equilibrium,
Large-population system,
Major-minor agent,
Mean-field game.

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