Dynamic Inventory Management with Mean-Field Competition

Ryan Donnelly and Zi Li

Applied Mathematical Finance, 2024, vol. 31, issue 5, 279-311

Abstract: Agents attempt to maximize expected profits earned by selling multiple units of a perishable product where their revenue streams are affected by the prices they quote as well as the distribution of other prices quoted in the market by other agents. We propose a model which captures this competitive effect and directly analyse the model in the mean-field limit as the number of agents is very large. We classify mean-field Nash equilibrium in terms of the solution to a Hamilton-Jacobi-Bellman equation and a consistency condition and use this to motivate an iterative numerical algorithm. Convergence of this numerical algorithm yields the pricing strategy of a mean-field Nash equilibrium. Properties of the equilibrium pricing strategies and overall market dynamics are then investigated, in particular how they depend on the strength of the competitive interaction and the ability to oversell the product.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1350486X.2025.2488769 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apmtfi:v:31:y:2024:i:5:p:279-311

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAMF20

DOI: 10.1080/1350486X.2025.2488769

Access Statistics for this article

Applied Mathematical Finance is currently edited by Professor Ben Hambly and Christoph Reisinger

More articles in Applied Mathematical Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().