English

A controller-stopper-game with hidden controller type

Probability 2023-07-06 v1 Optimization and Control

Abstract

We consider a continuous time stochastic dynamic game between a stopper (Player 11, the \textit{owner} of an asset yielding an income) and a controller (Player 22, the \textit{manager} of the asset), where the manager is either effective or non-effective. An effective manager can choose to exert low or high effort which corresponds to a high or a low positive drift for the accumulated income of the owner with random noise in terms of Brownian motion; where high effort comes at a cost for the manager. The manager earns a salary until the game is stopped by the owner, after which also no income is earned. A non-effective manager cannot act but still receives a salary. For this game we study (Nash) equilibria using stochastic filtering methods; in particular, in equilibrium the manager controls the learning rate (regarding the manager type) of the owner. First, we consider a strong formulation of the game which requires restrictive assumptions for the admissible controls, and find an equilibrium of (double) threshold type. Second, we consider a weak formulation, where a general set of admissible controls is considered. We show that the threshold equilibrium of the strong formulation is also an equilibrium in the weak formulation.

Keywords

Cite

@article{arxiv.2307.01623,
  title  = {A controller-stopper-game with hidden controller type},
  author = {Andi Bodnariu and Kristoffer Lindensjö},
  journal= {arXiv preprint arXiv:2307.01623},
  year   = {2023}
}
R2 v1 2026-06-28T11:21:43.079Z