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A linear-quadratic mean-field game of backward stochastic differential equation with partial information and common noise

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  • Huang, Pengyan
  • Wang, Guangchen
  • Wang, Wencan
  • Wang, Yu

Abstract

This paper studies a linear-quadratic (LQ) mean-field game of stochastic large-population system with partial information and common noise, where the large-population system satisfies a class of backward stochastic differential equations (BSDEs), and both coupling structure and ki (a part of solution of BSDE) enter state equations and cost functionals. By virtue of stochastic maximum principle and optimal filter technique, we obtain a Hamiltonian system first, which is a fully-coupled forward-backward stochastic differential equation (FBSDE). Decoupling the Hamiltonian system, we obtain three ordinary differential equations (ODEs), a forward and a backward optimal filtering equations, which enable us to derive an optimal control of an auxiliary limiting control problem. Next, we verify that a decentralized control strategy is an ϵ-Nash equilibrium of the LQ game. Finally, we solve a product pricing problem and a network security control problem in applications. We give a near-optimal price strategy and a near-optimal control strategy with numerical simulations, respectively.

Suggested Citation

  • Huang, Pengyan & Wang, Guangchen & Wang, Wencan & Wang, Yu, 2023. "A linear-quadratic mean-field game of backward stochastic differential equation with partial information and common noise," Applied Mathematics and Computation, Elsevier, vol. 446(C).
    • Handle: RePEc:eee:apmaco:v:446:y:2023:i:c:s0096300323000681
    DOI: 10.1016/j.amc.2023.127899
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    References listed on IDEAS

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    1. Wang, Guangchen & Wang, Wencan & Yan, Zhiguo, 2021. "Linear quadratic control of backward stochastic differential equation with partial information," Applied Mathematics and Computation, Elsevier, vol. 403(C).
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