Time-Inconsistent Mean-Field Stochastic LQ Problem: Open-Loop Time-Consistent Control

doi:10.1109/TAC.2017.2776740

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Time-Inconsistent Mean-Field Stochastic LQ Problem: Open-Loop Time-Consistent Control

2018-09-01

DOI：10.1109/TAC.2017.2776740

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Abstract

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This paper is concerned with the open-loop time-consistent solution of time-inconsistent mean-field stochastic linear-quadratic (LQ) optimal control. Different from standard stochastic linear-quadratic problems, both the system matrices and the weighting matrices are depending on the initial times, and the conditional expectations of the control and state enter quadratically into the cost functional. Such features will ruin Bellman's principle of optimality and result in the time inconsistency of optimal control. Based on the dynamical nature of the systems involved, a kind of open-loop time-consistent equilibrium control is investigated in this paper. It is shown that the existence of open-loop equilibrium control for a fixed initial pair is equivalent to the solvability of a set of forward-backward stochastic difference equations with stationary condition and convexity condition. By decoupling the forward-backward stochastic difference equations, necessary and sufficient conditions in terms of linear difference equations and generalized difference Riccati equations are given for the existence of open-loop equilibrium control for a fixed initial pair. Moreover, the existence of open-loop time-consistent equilibrium controls for all the initial pairs is shown to be equivalent to the solvability of a set of coupled constrained generalized difference Riccati equations and two sets of constrained linear difference equations.

Keywords:

Forward-backward stochastic difference equation

mean-field theory

stochastic linear-quadratic optimal control

time inconsistency

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