Incentive Design for Noncooperative Dynamical Systems Under Sustainable Budget Constraint For Pareto Improvement

A Pareto improving incentive mechanism is developed to improve the social welfare and achieve continual Pareto improvement for a pseudo-gradient-based noncooperative dynamical system. In the proposed approach, the system manager remodels agents' dynamical decision making by collecting taxes from some agents and giving some of the collected taxes to other agents as subsidies with a sustainable budget constraint. Sufficient conditions under which agents' state converges towards the socially maximum state associated with a weighted social welfare function depending on the priority ratio of the agents and the initial state are proposed.