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MFGs for partially reversible investment

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  • Cao, Haoyang
  • Guo, Xin

Abstract

This paper analyzes a class of infinite-time-horizon stochastic games with singular controls motivated from the partially reversible problem. It provides an explicit solution for the mean-field game (MFG), and presents sensitivity analysis to compare the solution for the MFG with that for the single-agent control problem. It shows that in the MFG, model parameters not only affect the optimal strategies as in the single-agent case, but also influence the equilibrium price. It then establishes that the solution to the MFG is an ε-Nash Equilibrium to the corresponding N-player game, with ε=O1N.

Suggested Citation

  • Cao, Haoyang & Guo, Xin, 2022. "MFGs for partially reversible investment," Stochastic Processes and their Applications, Elsevier, vol. 150(C), pages 995-1014.
    • Handle: RePEc:eee:spapps:v:150:y:2022:i:c:p:995-1014
    DOI: 10.1016/j.spa.2020.09.006
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    References listed on IDEAS

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    Cited by:

    1. Puru Gupta & Saul D. Jacka, 2023. "Portfolio Choice In Dynamic Thin Markets: Merton Meets Cournot," Papers 2309.16047, arXiv.org.
    2. Ren'e Aid & Matteo Basei & Giorgio Ferrari, 2023. "A Stationary Mean-Field Equilibrium Model of Irreversible Investment in a Two-Regime Economy," Papers 2305.00541, arXiv.org.
    3. Aïd, René & Basei, Matteo & Ferrari, Giorgio, 2023. "A Stationary Mean-Field Equilibrium Model of Irreversible Investment in a Two-Regime Economy," Center for Mathematical Economics Working Papers 679, Center for Mathematical Economics, Bielefeld University.

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