Open-loop potential difference games with inequality constraints

Abstract: Static potential games are non-cooperative games which admit a fictitious function, also referred to as a potential function, such that the minimizers of this function constitute a subset (or a refinement) of the Nash equilibrium strategies of the associated non-cooperative game. In this paper, we study a class $N$-player non-zero sum difference games with inequality constraints which admit a potential game structure. In particular, we provide conditions for the existence of an optimal control problem (with inequality constraints) such that the solution of this problem yields an open-loop Nash equilibrium strategy of the corresponding dynamic non-cooperative game (with inequality constraints). Further, we provide a way to construct potential functions associated with this optimal control problem. We specialize our general results to a linear-quadratic setting and provide a linear complementarity problem-based approach for computing the refinements of the open-loop Nash equilibria. We illustrate our results with an example inspired by energy storage incentives in a smart grid.