Controlled Markov chains with non-exponential discounting and distribution-dependent costs

Abstract

This paper deals with a controlled Markov chain in continuous time with a non-exponential discounting and distribution-dependent cost functional. A definition of closed-loop equilibrium is given and its existence and uniqueness are established. Due to the time-inconsistency brought by the non-exponential discounting and distribution dependence, it is proved that the equilibrium is locally optimal in some appropriate sense. Moreover, it is shown that our problem is equivalent to a mean-field game for infinite-many symmetric players with a non-exponential discounting cost.