Analysis of the Finite-State Ergodic Master Equation

TL;DR

This paper studies the ergodic mean field game equilibrium in finite-state, infinite-horizon settings, linking it with the ergodic master equation and demonstrating smoothness properties as the discount factor approaches zero.

Contribution

It characterizes the stationary ergodic mean field game equilibrium via coupled equations and establishes the smoothness of the ergodic master equation through analysis of discounted systems.

Findings

Ergodic master equation is smooth under certain conditions.

Discounted master equations are uniformly smooth as discount factor varies.

Zero discount limit yields smooth ergodic master equation.

Abstract

Mean field games model equilibria in games with a continuum of players as limiting systems of symmetric $n$-player games with weak interaction between the players. We consider a finite-state, infinite-horizon problem with two cost criteria: discounted and ergodic. Under the Lasry--Lions monotonicity condition we characterize the stationary ergodic mean field game equilibrium by a mean field game system of two coupled equations: one for the value and the other for the stationary measure. This system is linked with the ergodic master equation. Several discounted mean field game systems are utilized in order to set up the relevant discounted master equations. We show that the discounted master equations are smooth, uniformly in the discount factor. Taking the discount factor to zero, we achieve the smoothness of the ergodic master equation.