Cooperative stochastic games with mean-variance preferences

Elena Parilina, Stepan Akimochkin

Research output: Contribution to journalArticlepeer-review

Abstract

In stochastic games, the player’s payoff is a stochastic variable. In most papers, expected payoff is considered as a payoff, which means the risk neutrality of the players. However, there may exist risk-sensitive players who would take into account “risk” measuring their stochastic payoffs. In the paper, we propose a model of stochastic games with mean-variance payoff functions, which is the sum of expectation and standard deviation multiplied by a coefficient characterizing a player’s attention to risk. We construct a cooperative version of a stochastic game with mean-variance preferences by defining characteristic function using a maxmin approach. The imputation in a cooperative stochastic game with mean-variance preferences is supposed to be a random vector. We construct the core of a cooperative stochastic game with mean-variance preferences. The paper extends existing models of discrete-time stochastic games and approaches to find cooperative solutions in these games.

Original languageEnglish
Article number230
Pages (from-to)1-15
Number of pages15
JournalMathematics
Volume9
Issue number3
DOIs
StatePublished - 1 Feb 2021

Scopus subject areas

  • Mathematics(all)

Keywords

  • Cooperative stochastic games
  • Core
  • Mean-variance preferences
  • Risk-sensitive payoff
  • Stochastic payoff

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