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Dynamic Pricing of New Products in Competitive Markets: A Mean-Field Game Approach

Chenavaz, Régis; Paraschiv, Corina; Turinici, Gabriel (2017), Dynamic Pricing of New Products in Competitive Markets: A Mean-Field Game Approach. https://basepub.dauphine.fr/handle/123456789/17565

Type
Document de travail / Working paper
External document link
https://hal.archives-ouvertes.fr/hal-01592958
Date
2017
Series title
Cahier de recherche CEREMADE, Université Paris-Dauphine
Pages
30
Metadata
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Author(s)
Chenavaz, Régis
Laboratoire Traitement et Communication de l'Information [LTCI]
Paraschiv, Corina
Groupement de Recherche et d'Etudes en Gestion à HEC [GREGH]
Institut Universitaire de France [IUF]
Turinici, Gabriel cc
CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Abstract (EN)
Dynamic pricing of new products has been extensively studied in monopolistic and oligopolistic markets. But, the optimal control and differential game tools used to investigate the pricing behavior on markets with a finite number of firms are not well-suited to model competitive markets with an infinity of firms. Using a mean-field games approach, this paper examines dynamic pricing policies in competitive markets, where no firm exerts market power. The theoretical setting is based on a diffusion modeì a la Bass. We prove both the existence and the uniqueness of a mean-field game equilibrium, and we investigate mean tendencies and firms dispersion in the market. Numerical simulations show that the competitive market splits into two separate groups of firms depending on their production experience. The two groups differ in price and profit. Thus, high prices and profits do not have to signal anticompetitive practices, stimulating the debate on market regulation.
Subjects / Keywords
competitive markets; mean-field games; Dynamic pricing; new products diffusion
JEL
D41 - Perfect Competition
D21 - Firm Behavior: Theory
C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
C62 - Existence and Stability Conditions of Equilibrium
C61 - Optimization Techniques; Programming Models; Dynamic Analysis

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