The Master Equation in a Bounded Domain with Absorption

Abstract: We analyze the Master Equation and the convergence problem within Mean Field Games theory considering a bounded domain with homogeneous Dirichlet conditions. This framework characterizes N-players differential games where each player's dynamic ends when touching the boundary, leading to two Dirichlet boundary conditions in the Master Equation. In the first part of the paper we analyze both the well-posedness of the Master Equation and the regularity of its solutions studying the global regularity at the boundary of solutions for a suitable class of parabolic equations. Such results are then exploited to consider the convergence problem of the Nash equilibria, towards the Mean Field Games system strategies, in the N-players system, also proving optimal trajectories convergence. Eventually, we apply our findings to solve a toy model related to an optimal liquidation scenario.