A regular equilibrium solves the extended HJB system
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Publication:2294352
DOI10.1016/J.ORL.2019.07.011zbMATH Open1476.93161arXiv1611.02902OpenAlexW2964759233WikidataQ127391911 ScholiaQ127391911MaRDI QIDQ2294352FDOQ2294352
Authors: Kristoffer Lindensjö 
Publication date: 10 February 2020
Published in: Operations Research Letters (Search for Journal in Brave)
Abstract: Control problems not admitting the dynamic programming principle are known as time-inconsistent. The game-theoretic approach is to interpret such problems as intrapersonal dynamic games and look for subgame perfect Nash equilibria. A fundamental result of time-inconsistent stochastic control is a verification theorem saying that solving the extended HJB system is a sufficient condition for equilibrium. We show that solving the extended HJB system is a necessary condition for equilibrium, under regularity assumptions. The controlled process is a general It^o diffusion.
Full work available at URL: https://arxiv.org/abs/1611.02902
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time-inconsistent preferencestime-inconsistent stochastic controldynamic inconsistencysubgame perfect Nash equilibriumextended HJB system
Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Hamilton-Jacobi theories (49L99) Dynamic games (91A25) Optimal stochastic control (93E20)
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