MFGs for partially reversible investment
Haoyang Cao and
Stochastic Processes and their Applications, 2022, vol. 150, issue C, 995-1014
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 ε-Nash Equilibrium to the corresponding N-player game, with ε=O1N.
Keywords: Mean-field games; Singular controls; Partially reversible investment; ε-Nash equilibrium; Approximation (search for similar items in EconPapers)
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