Stationary Mean-Field Games of Singular Control under Knightian Uncertainty

TL;DR

This paper investigates stationary mean-field games involving singular control under model uncertainty, establishing existence and uniqueness of equilibrium and analyzing the impact of uncertainty on optimal strategies.

Contribution

It introduces a novel framework for mean-field games with singular control under Knightian uncertainty, proving equilibrium existence and uniqueness.

Findings

Existence and uniqueness of stationary mean-field equilibrium proven.

Uncertainty significantly affects optimal control strategies.

Application to natural resource extraction under uncertainty.

Abstract

In this work, we study a class of stationary mean-field games of singular stochastic control under model uncertainty. The representative agent adjusts the dynamics of an It\^o diffusion via one-sided singular stochastic control, aiming to maximize a long-term average expected profit criterion. The mean-field interaction is of scalar type through the stationary distribution of the population. Due to the presence of uncertainty, the problem involves the study of a stochastic (zero-sum) game, where the decision maker chooses the "best" singular control policy, while the adversarial player selects the "worst" probability measure. Using a constructive approach, we prove existence and uniqueness of a stationary mean-field equilibrium. Finally, we present an example of mean-field optimal extraction of natural resources under uncertainty and we analyze the impact of uncertainty on the mean-field equilibrium.