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

Authors
  • Chenavaz, Régis
  • Paraschiv, Corina
  • Turinici, Gabriel
Publication Date
Sep 25, 2017
Source
HAL-UPMC
Keywords
Language
English
License
Unknown
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Abstract

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.

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