Stochastic Stackelberg equilibria with applications to time dependent newsvendor models

Bernt Øksendal (), Leif Sandal () and Jan Ubøe
Additional contact information
Bernt Øksendal: Dept. of Mathematics, University of Oslo, Postal: University of Oslo, Department of Mathematics, Postboks 1053 Blindern, 0316 Oslo, Norway, http://www.mn.uio.no/math/personer/vit/oksendal/

No 2011/9, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: In this paper we prove a sufficient maximum principle for general stochastic differential Stackelberg games, and apply the theory to continuous time newsvendor problems. In the newsvendor problem a manufacturer sells goods to a retailer, and the objective of both parties is to maximize expected profits under a random demand rate. Our demand rate is an Ito-Levy process, and to increase realism information is delayed, e.g., due to production time. We provide complete existence and uniqueness proofs for a series of special cases, including geometric Brownian motion and the Ornstein-Uhlenbeck process, both with time variable coefficients. Moreover, these results are operational because we are able to offer explicit solution formulas. An interesting finding is that more precise information may be a considerable disadvantage for the retailer.

Keywords: Stochastic differential games; newsvendor model; delayed information; Ito-Levy processes (search for similar items in EconPapers)
JEL-codes: C00 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-05-19
New Economics Papers: this item is included in nep-ore
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/11250/164022 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://hdl.handle.net/11250/164022 [302 Found]--> https://www.unit.no/brage-denne-lenken-er-ikke-lenger-gyldig [301 Moved Permanently]--> https://sikt.no/brage-denne-lenken-er-ikke-lenger-gyldig)

Related works:
Journal Article: Stochastic Stackelberg equilibria with applications to time-dependent newsvendor models (2013)
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:hhs:nhhfms:2011_009

Access Statistics for this paper

More papers in Discussion Papers from Norwegian School of Economics, Department of Business and Management Science NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Stein Fossen ().