Pricing problems with a continuum of customers as stochastic Stackelberg games
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The pricing problem where a company sells a certain kind of product to a continuum of customers is considered. It is formulated as a stochastic Stackelberg game with nonnested information structure. The inducible region concept, recently developed for deterministic Stackelberg games, is extended to treat the stochastic pricing problem. Necessary and sufficient conditions for a pricing scheme to be optimal are derived, and the pricing problem is solved by first delineating its inducible region, and then solving a constrained optimal control problem.
Key WordsStackelberg games stochastic games pricing problems nonnested information multiperson optimization
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