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Mean Field Social Control for Production Output Adjustment with Noisy Sticky Prices

Author

Listed:
  • Bing-Chang Wang

    (Shandong University)

  • Minyi Huang

    (Carleton University)

Abstract

This paper is concerned with mean field social control for dynamic production adjustment. We first introduce a social control problem with many firms in a market, where the price is sticky and affected by random shocks. By tackling a centralized social control problem, we obtain a system of coupled forward–backward stochastic differential equations (FBSDEs). Decoupling the FBSDEs and applying mean field approximations, we design a set of decentralized strategies in terms of two Riccati equations. Such a set of decentralized strategies is shown to have asymptotic social optimality. The infinite-horizon problem is further considered and a neat condition is given to ensure asymptotic optimality of decentralized strategies.

Suggested Citation

  • Bing-Chang Wang & Minyi Huang, 2024. "Mean Field Social Control for Production Output Adjustment with Noisy Sticky Prices," Dynamic Games and Applications, Springer, vol. 14(3), pages 716-732, July.
    • Handle: RePEc:spr:dyngam:v:14:y:2024:i:3:d:10.1007_s13235-023-00512-z
    DOI: 10.1007/s13235-023-00512-z
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