Contents Online
Communications in Mathematical Sciences
Volume 22 (2024)
Number 1
A variational approach for price formation models in one dimension
Pages: 227 – 255
DOI: https://dx.doi.org/10.4310/CMS.2024.v22.n1.a10
Authors
Abstract
In this paper, we study a class of first-order mean-field games (MFGs) that model price formation. Using Poincaré lemma, we eliminate one of the equations of the MFGs system and obtain a variational problem for a single function. We prove the uniqueness of the solutions to the variational problem and address the existence of solutions by applying relaxation arguments. Moreover, we establish a correspondence between solutions of the MFGs system and the variational problem. Based on this correspondence, we introduce an alternative numerical approach for the solution of the original MFGs problem. We end the paper with numerical results for a linear-quadratic model.
Keywords
mean field games, price formation, potential function, Lagrange multiplier
2010 Mathematics Subject Classification
35A15, 49N10
Received 30 May 2022
Received revised 8 June 2023
Accepted 8 June 2023
Published 7 December 2023