Open-Loop Stackelberg Games for Stochastic Systems

Abstract

This paper investigates open-loop Stackelberg games for a class of stochastic systems with multiple players. First, the necessary conditions for the existence of an open-loop Stackelberg strategy set are established using the stochastic maximum principle. Such conditions can be represented as solvability conditions for cross-coupled forward-backward stochastic differential equations (CFBSDEs). Second, in order to obtain the open-loop strategy set, a computational algorithm based on a four-step scheme is developed. A numerical example is then demonstrated to show the validity of the proposed method.