We study risk-sensitive stochastic optimal control and differential game problems. These problems arise in many applications including heavy traffic analysis of queueing networks, communication networks, and manufacturing systems.

First, we study risk-sensitive stochastic differential games for controlled reflecting diffusion processes in a smooth bounded domain in $\mathbb{R}^{d}$. We consider both nonzero-sum and zero-sum cases. We treat two cost evaluation criteria namely discounted cost and ergodic cost. Under certain assumptions, we establish the existence of a Nash/saddle-point equilibria for relevant cases. For ergodic cost criterion, we use principal eigenvalue approach to study the game problems. This approach enables us to obtain a complete characterization of Nash/saddle point equilibrium in the space of stationary Markov strategies.

Subsequently, we study risk-sensitive ergodic control problem for controlled reflecting diffusion processes in the non-negative orthant. Under a certain Lyapunov type stability assumption and some other technical assumptions, we first establish the existence of a solution to the multiplicative Poisson equation for each stationary Markov control. Using this result, we establish the existence of a unique solution to the corresponding Hamilton-Jacobi-Bellman (HJB) equation. This, in turn, leads to the complete characterization of optimal controls in the space of stationary Markov controls.

Then we study risk-sensitive zero-sum/nonzero-sum stochastic differential games on the infinite horizon, where the state is a controlled reflecting diffusion in the non-negative orthant. We consider two cost evaluation criteria: discounted cost and ergodic cost. Under certain assumptions, we establish the existence of a saddle point/Nash equilibria, for relevant cases. We obtain our results by studying the corresponding Hamilton-Jacobi-Isaacs (HJI)/coupled HJB equations. For the ergodic cost criterion, we completely characterize a saddle point/Nash equilibria in the space of stationary strategies.

Finally, we study nonzero-sum stochastic differential games with risk-sensitive ergodic cost criteria, where the state space is a controlled diffusion process in $\mathbb{R}^{d}.$ Under certain conditions, we establish the existence of a Nash equilibrium in stationary strategies. We achieve our results by studying the relevant systems of coupled HJB equations. Also, we completely characterize a Nash equilibrium in the space of stationary strategies.

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Last updated: 14 Feb 2020