Stochastic Stackelberg equilibria with applications to time-dependent newsvendor models
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OriginalversjonJournal of Economic Dynamics and Control 2013, 37(7):1284-1299 10.1016/j.jedc.2013.02.010
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.
-This is the author's version of the article"Stochastic Stackelberg equilibria with applications to time-dependent newsvendor models", Journal of Economic Dynamics and Control, Volume 37, Issue 7, July 2013, Pages 1284–1299.