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Dynamic Cournot-Nash equilibrium: the non-potential case

Author

Listed:
  • Julio Backhoff-Veraguas

    (University of Vienna)

  • Xin Zhang

    (University of Vienna)

Abstract

We consider a large population dynamic game in discrete time where players are characterized by time-evolving types. It is a natural assumption that the players’ actions cannot anticipate future values of their types. Such games go under the name of dynamic Cournot-Nash equilibria, and were first studied by Acciaio et al. (SIAM J Control Optim 59:2273–2300, 2021), as a time/information dependent version of the games devised by Blanchet and Carlier ( Math Oper Res 41:125–145, 2016) for the static situation, under an extra assumption that the game is of potential type. The latter means that the game can be reduced to the resolution of an auxiliary variational problem. In the present work we study dynamic Cournot-Nash equilibria in their natural generality, namely going beyond the potential case. As a first result, we derive existence and uniqueness of equilibria under suitable assumptions. Second, we study the convergence of the natural fixed-point iterations scheme in the quadratic case. Finally we illustrate the previously mentioned results in a toy model of optimal liquidation with price impact, which is a game of non-potential kind.

Suggested Citation

  • Julio Backhoff-Veraguas & Xin Zhang, 2023. "Dynamic Cournot-Nash equilibrium: the non-potential case," Mathematics and Financial Economics, Springer, volume 17, number 1, June.
    • Handle: RePEc:spr:mathfi:v:17:y:2023:i:2:d:10.1007_s11579-022-00327-3
    DOI: 10.1007/s11579-022-00327-3
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    References listed on IDEAS

    as
    1. Julio Backhoff-Veraguas & Daniel Bartl & Mathias Beiglböck & Manu Eder, 2020. "Adapted Wasserstein distances and stability in mathematical finance," Finance and Stochastics, Springer, vol. 24(3), pages 601-632, July.
    2. Adrien Blanchet & Guillaume Carlier, 2016. "Optimal Transport and Cournot-Nash Equilibria," Mathematics of Operations Research, INFORMS, vol. 41(1), pages 125-145, February.
    3. Acciaio, B. & Backhoff-Veraguas, J. & Zalashko, A., 2020. "Causal optimal transport and its links to enlargement of filtrations and continuous-time stochastic optimization," Stochastic Processes and their Applications, Elsevier, vol. 130(5), pages 2918-2953.
    4. Blanchet, Adrien & Carlier, Guillaume, 2014. "From Nash to Cournot-Nash equilibria via the Monge-Kantorovich problem," TSE Working Papers 14-490, Toulouse School of Economics (TSE).
    5. Erhan Bayraktar & Xin Zhang, 2019. "On non-uniqueness in mean field games," Papers 1908.06207, arXiv.org, revised Mar 2020.
    6. Julio Backhoff-Veraguas & Daniel Bartl & Mathias Beiglbock & Manu Eder, 2019. "Adapted Wasserstein Distances and Stability in Mathematical Finance," Papers 1901.07450, arXiv.org, revised May 2020.
    7. Acciaio, B. & Backhoff-Veraguas, J. & Zalashko, A., 2020. "Causal optimal transport and its links to enlargement of filtrations and continuous-time stochastic optimization," LSE Research Online Documents on Economics 101864, London School of Economics and Political Science, LSE Library.
    8. Daniel Lacker & Kavita Ramanan, 2019. "Rare Nash Equilibria and the Price of Anarchy in Large Static Games," Mathematics of Operations Research, INFORMS, vol. 44(2), pages 400-422, May.
    9. Blanchet, Adrien & Carlier, Guillaume, 2014. "Remarks on existence and uniqueness of Cournot-Nash equilibria in the non-potential case," TSE Working Papers 14-491, Toulouse School of Economics (TSE).
    Full references (including those not matched with items on IDEAS)

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