Mean Field Competition of Optimal Switching: The Vanishing Entropy Regularization Approach

Abstract

This paper studies a type of rank-based mean field game in which competing agents strategically switch among multiple effort regimes. We propose an entropy regularized auxiliary problem where the switching decisions are randomized to the control of transition probability for a continuous-time finite-state Markov chain. We first establish the existence of regularized equilibrium in this auxiliary problem. Assuming the convexity of reward scheme, we then prove that the equilibrium is unique and can be approximated by a fictitious play iteration scheme. Furthermore, as the entropy regularization vanishes, we establish the convergence analysis of the regularized equilibrium towards the relaxed equilibrium in the original MFG of optimal switching. The uniqueness of the population ranking distribution under the relaxed equilibrium is also obtained given a strictly convex reward scheme.