Mean Field Production Output Control with Sticky Prices: Nash and Social Solutions

Abstract: This paper presents an application of mean field control to dynamic production optimization. Both noncooperative and cooperative solutions are considered. We first introduce a market of a large number of agents (firms) with sticky prices and adjustment costs. By solving auxiliary limiting optimal control problems subject to consistent mean field approximations, two sets of decentralized strategies are obtained and further shown to asymptotically attain Nash equilibria and social optima, respectively. The performance estimate of the social optimum strategies exploits a passivity property of the underlying model. A numerical example is given to compare market prices, firms' outputs and costs under two two solution frameworks.