A Kind of Optimal Incentive Strategy for Leader-Follower Games

Abstract

In this paper, we present a kind of optimal incentive strategy for leader-follower games. Using this strategy, the leader will suffer the least losses in punishing deviation of the follower. We in details discuss a special class of static and dynamic leader-follower games in which the follower's decision is scalar and the cost functions of both leader and follower are quadratic and give the method of determining optimal incentive strategy. The sufficient conditions under which optimal incentive strategy exists are given and the optimal incentive strategies are derived. In order to illustrate the ideas and methods of the paper, a example is given.