Control of McKean-Vlasov dynamics versus mean field games

Rene A. Carmona, François Delarue, Aimé Lachapelle

Research output: Contribution to journalArticle

86 Scopus citations

Abstract

We discuss and compare two investigation methods for the asymptotic regime of stochastic differential games with a finite number of players as the number of players tends to the infinity. These two methods differ in the order in which optimization and passage to the limit are performed. When optimizing first, the asymptotic problem is usually referred to as a mean-field game. Otherwise, it reads as an optimization problem over controlled dynamics of McKean-Vlasov type. Both problems lead to the analysis of forward-backward stochastic differential equations, the coefficients of which depend on the marginal distributions of the solutions. We explain the difference between the nature and solutions to the two approaches by investigating the corresponding forward-backward systems. General results are stated and specific examples are treated, especially when cost functionals are of linear-quadratic type.

Original languageEnglish (US)
Pages (from-to)131-166
Number of pages36
JournalMathematics and Financial Economics
Volume7
Issue number2
DOIs
StatePublished - 2013

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Finance
  • Statistics, Probability and Uncertainty

Keywords

  • Cap-and-trade model
  • Controlled McKean-Vlasov stochastic differential equations
  • Forward-backward stochastic differential equations
  • Linear-quadratic
  • Mean-field game

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