A mean-field game price model with noise

Understand

In this paper, we propose a mean-field game model for the price formation of a commodity whose production is subjected to random fluctuations.

• The model generalizes existing deterministic price formation models.
• Agents seek to minimize their average cost by choosing their trading rates with a price that is characterized by a balance between supply and demand.
• The supply and the price processes are assumed to follow stochastic differential equations.