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

Régis Chenavaz, Corina Paraschiv and Gabriel Turinici ()
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Corina Paraschiv: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, IUF - Institut universitaire de France - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche
Gabriel Turinici: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, IUF - Institut universitaire de France - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche

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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.

Keywords: Dynamic pricing; new products diffusion; mean-field games; competitive markets (search for similar items in EconPapers)
Date: 2020-11-01
New Economics Papers: this item is included in nep-com and nep-gth
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Citations: View citations in EconPapers (2)

Published in Dynamic Games and Applications, 2020, 10, ⟨10.1007/s13235-020-00369-6⟩

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Journal Article: Dynamic Pricing of New Products in Competitive Markets: A Mean-Field Game Approach (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01592958

DOI: 10.1007/s13235-020-00369-6

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