Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098632 | Journal of Economic Dynamics and Control | 2013 | 16 Pages |
Abstract
In this paper, we prove a 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 Itô-Lévy process, and to increase realism information is delayed, e.g., due to production time. A special feature of our time-continuous model is that it allows for a price-dependent demand, thereby opening for strategies where pricing is used to manipulate the demand.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Bernt Ãksendal, Leif Sandal, Jan Ubøe,