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Linear-Quadratic-Gaussian mean-field controls of social optima

The first author acknowledges the support from: RGC Grants PolyU P0008686; The second author is supported by the financial support by RGC Grants PolyU 153005/14P, 153275/16P, P0030808; The third author acknowledges the support from: RGC Grants PolyU P0031044

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  • This paper investigates a class of unified stochastic linear-quadratic-Gaussian (LQG) social optima problems involving a large number of weakly-coupled interactive agents under a generalized setting. For each individual agent, the control and state process enters both diffusion and drift terms in its linear dynamics, and the control weight might be indefinite in cost functional. This setup is innovative and has great theoretical and realistic significance as its applications in mathematical finance (e.g., portfolio selection in mean-variation model). Using some fully-coupled variational analysis under the person-by-person optimality principle, and the mean-field approximation method, the decentralized social control is derived by a class of new type consistency condition (CC) system for typical representative agent. Such CC system is some mean-field forward-backward stochastic differential equation (MF-FBSDE) combined with embedding representation. The well-posedness of such forward-backward stochastic differential equation (FBSDE) system is carefully examined. The related social asymptotic optimality is related to the convergence of the average of a series of weakly-coupled backward stochastic differential equation (BSDE). They are verified through some Lyapunov equations.

    Mathematics Subject Classification: Primary: 91A23, 93E20; Secondary: 91A12, 91A25, 93E03.


    \begin{equation} \\ \end{equation}
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  • Figure 1.  The trajectories of realized state-average $ \tilde{x}^{(N)} $ and mean-field term $ \hat{x} $

    Figure 2.  The trajectories of the components in equation (41), when $ C,F\neq 0 $

    Figure 3.  The trajectories of the components in equation (41), when C = F = 0

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