MFGs for partially reversible investment

DOI10.1016/J.SPA.2020.09.006MaRDI QIDQ2145812zbMATH OpenOpenAlexFDO

Authors Haoyang Cao, Xin Guo

Publication date 20 June 2022

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1908.10916

zbMATH Keywords

approximationmean-field gamessingular controlspartially reversible investment\(\epsilon\)-Nash equilibrium

Mathematics Subject Classification ID

Portfolio theory (91G10) Stochastic games, stochastic differential games (91A15) Mean field games (aspects of game theory) (91A16)

Abstract: This paper analyzes a class of infinite-time-horizon stochastic games with singular controls motivated from the partially reversible problem. It provides an explicit solution for the mean-field game (MFG) and presents sensitivity analysis to compare the solution for the MFG with that for the single-agent control problem. It shows that in the MFG, model parameters not only affect the optimal strategies as in the single-agent case, but also influence the equilibrium price. It then establishes that the solution to the MFG is an $epsilon$-Nash Equilibrium to the corresponding $N$-player game, with $epsilon=Oleft(frac1sqrtNight)$.

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Cited in

(1)

• Mean-field games of finite-fuel capacity expansion with singular controls

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