  We consider a stochastic game of control and stopping specified in terms of a
process $X_t=-\theta \Lambda_t+W_t$, representing the holdings of Player 1,
where $W$ is a Brownian motion, $\theta$ is a Bernoulli random variable
indicating whether Player 2 is active or not, and $\Lambda$ is a non-decreasing
process representing the accumulated "theft" or "fraud" performed by Player 2
(if active) against Player 1. Player 1 cannot observe $\theta$ or $\Lambda$
directly, but can merely observe the path of the process $X$ and may choose a
stopping rule $\tau$ to deactivate Player 2 at a cost $M$. Player 1 thus does
not know if she is the victim of fraud and operates in this sense under unknown
competition. Player 2 can observe both $\theta$ and $W$ and seeks to choose the
fraud strategy $\Lambda$ that maximizes the expected discounted amount
\[{\mathbb E} \left [\theta\int _0^{\tau} e^{-rs} d\Lambda_s \right ],\]
whereas Player 1 seeks to choose the stopping strategy $\tau$ so as to minimize
the expected discounted cost \[{\mathbb E} \left [\theta\int _0^{\tau} e^{-rs}
d\Lambda_s + e^{-r\tau}M{\mathbb I}_{\{\tau<\infty\}} \right ].\] This
non-zero-sum game appears to be novel and is motivated by applications in fraud
detection; it combines filtering (detection), non-singular control, stopping,
strategic features (games) and asymmetric information. We derive Nash
equilibria for this game; for some parameter values we find an equilibrium in
pure strategies, and for other parameter values we find an equilibrium by
allowing for randomized stopping strategies.

Optimization and Control;Probability