$N$-Player Stochastic Differential Games with Regime Switching and Mean Field Convergence

TL;DR

This paper studies $N$-player stochastic differential games with regime switching, establishing existence and uniqueness of Nash equilibria and connecting them to mean field game solutions via stochastic equations with jumps.

Contribution

It introduces a regime-switching framework for $N$-player games and proves the existence, uniqueness, and approximation properties of Nash equilibria and mean field solutions.

Findings

Existence and uniqueness of Nash equilibria in regime-switching games.

Connection between Nash equilibria and solutions to forward-backward stochastic differential equations.

Propagation of chaos showing MFG controls approximate $N$-player Nash equilibria.

Abstract

In this study, we investigate $N$-player stochastic differential games with regime switching, where the player dynamics are modulated by a finite-state Markov chain. We analyze the associated Nash system, which consists of a system of coupled nonlinear partial differential equations, and establish the existence and uniqueness of solutions to this system, thereby proving the existence of a unique Nash equilibrium. Additionally, we examine the mean field game problem under the same regime-switching framework. We derive a connection between the Nash equilibrium of the MFG and forward-backward stochastic differential equation with jumps, and demonstrate the unique solvability of this equation. Finally, we explore the propagation of chaos and show that the optimal control obtained from the MFG serves as an approximate Nash equilibrium for the $N$-player problem.