A mean field game price model with noise

DOI10.3934/MINE.2021028zbMATH Open1498.91194arXiv2003.01945OpenAlexW3044033178MaRDI QIDQ2167465FDOQ2167465

Authors: D. Gomes, Julian Gutiérrez, Ricardo Ribeiro 

Publication date: 25 August 2022

Published in: Mathematics in Engineering (Search for Journal in Brave)

Abstract: In this paper, we propose a mean-field game model for the price formation of a commodity whose production is subjected to random fluctuations. The model generalizes existing deterministic price formation models. Agents seek to minimize their average cost by choosing their trading rates with a price that is characterized by a balance between supply and demand. The supply and the price processes are assumed to follow stochastic differential equations. Here, we show that, for linear dynamics and quadratic costs, the optimal trading rates are determined in feedback form. Hence, the price arises as the solution to a stochastic differential equation, whose coefficients depend on the solution of a system of ordinary differential equations.

Full work available at URL: https://arxiv.org/abs/2003.01945

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zbMATH Keywords

mean field gamescommon noiseprice formationequilibrium pricinglinear quadratic modelconstrained mean-field games

Mathematics Subject Classification ID

Applications of game theory (91A80) Microeconomic theory (price theory and economic markets) (91B24) Mean field games (aspects of game theory) (91A16)

Cites Work

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Cited In (12)

• A Mean Field Game Approach to Equilibrium Pricing with Market Clearing Condition
• Title not available (Why is that?)
• A Random-Supply Mean Field Game Price Model
• A mean field game model of firm-level innovation
• A price model with finitely many agents
• Machine learning architectures for price formation models
• Optimal bubble riding with price-dependent entry: a mean field game of controls with common noise
• A McKean-Vlasov game of commodity production, consumption and trading
• A mean-field game approach to price formation
• A stochastic control model for the average price of manufacturer sales on commodity exchanges
• A mean-field game model of price formation with price-dependent agent behavior
• Strong Convergence to the Mean Field Limit of a Finite Agent Equilibrium

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