The Annals of Probability
- Ann. Probab.
- Volume 29, Number 3 (2001), 1111-1127.
The Controller-and-Stopper Game for a Linear Diffusion
Ioannis Karatzas and William D. Sudderth
Abstract
Consider a process $X(\cdot) = {X(t), 0 \leq t < \infty}$ with values in the interval $I = (0, 1)$, absorption at the boundary points of $I$, and dynamics
$$dX(t) = \beta(t)dt + \sigma(t)dW(t),\quad X(0) = x.$$
The values $(\beta(t), \sigma(t))$ are selected by a controller from a subset of $\Re \times (0, \infty)$ that depends on the current position $X(t)$, for every $t \geq 0$. At any stopping rule $\tau$ of his choice, a second player, called a stopper, can halt the evolution of the process $X(\cdot)$, upon which he receives from the controller the amount $e^{-\alpha\tau}u(X(\tau))$; here $\alpha \epsilon [0, \infty)$ is a discount factor, and $u: [0, 1] \to \Re$ is a continuous “reward function.” Under appropriate conditions on this function and on the controller’s set of choices, it is shown that the two players have a saddlepoint of “optimal strategies.” These can be described fairly explicitly by reduction to a suitable problem of optimal stopping, whose maximal expected reward V coincides with the value of the game,
$$V = \sup_{\tau} \inf_{X(\cdot)} \mathbf{E}[e^{-\alpha\tau}u(X(\tau))] = \inf_{X(\cdot)} \sup_{\tau} \mathbf{E}[e^{-\alpha\tau}u(X(\tau))].$$
Article information
Source
Ann. Probab., Volume 29, Number 3 (2001), 1111-1127.
Dates
First available in Project Euclid: 5 March 2002
Permanent link to this document
https://projecteuclid.org/euclid.aop/1015345598
Digital Object Identifier
doi:10.1214/aop/1015345598
Mathematical Reviews number (MathSciNet)
MR1872738
Zentralblatt MATH identifier
1039.60043
Subjects
Primary: 93E20: Optimal stochastic control 60G40: Stopping times; optimal stopping problems; gambling theory [See also 62L15, 91A60]
Secondary: 62L15: Optimal stopping [See also 60G40, 91A60] 60D60
Keywords
Stochastic game optimal stopping one-dimensional diffusions generalized Itô rule local time excessive functions
Citation
Karatzas, Ioannis; Sudderth, William D. The Controller-and-Stopper Game for a Linear Diffusion. Ann. Probab. 29 (2001), no. 3, 1111--1127. doi:10.1214/aop/1015345598. https://projecteuclid.org/euclid.aop/1015345598
