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
TypeDocument de travail / Working paper
External document linkhttps://hal.archives-ouvertes.fr/hal-01592958
Series titleCahier de recherche CEREMADE, Université Paris-Dauphine
MetadataShow full item record
Laboratoire Traitement et Communication de l'Information [LTCI]
Groupement de Recherche et d'Etudes en Gestion à HEC [GREGH]
Institut Universitaire de France [IUF]
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 / Keywordscompetitive markets; mean-field games; Dynamic pricing; new products diffusion
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