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arXiv · 2401.15835

Direct Approach of Linear-Quadratic Stackelberg Mean Field Games of Backward-Forward Stochastic Systems

Wenyu Cong·Jingtao Shi
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Abstract

This paper is concerned with a linear-quadratic (LQ) Stackelberg mean field games of backward-forward stochastic systems, involving a backward leader and a substantial number of forward followers. The leader initiates by providing its strategy, and subsequently, each follower optimizes its individual cost. A direct approach is applied to solve this game. Initially, we address a mean field game problem, determining the optimal response of followers to the leader's strategy. Following the implementation of followers' strategies, the leader faces an optimal control problem driven by high-dimensional forward-backward stochastic differential equations (FBSDEs). Through the decoupling of the high-dimensional Hamiltonian system using mean field approximations, we formulate a set of decentralized strategies for all players, demonstrated to be an $(\epsilon_1, \epsilon_2)$-Stackelberg equilibrium.

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Wenyu Cong, Jingtao Shi. 2024-01-29. Direct Approach of Linear-Quadratic Stackelberg Mean Field Games of Backward-Forward Stochastic Systems. https://arxiv.org/abs/2401.15835

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