Stochastic Stackelberg equilibria with applications to time dependent newsvendor models

  title={Stochastic Stackelberg equilibria with applications to time dependent newsvendor models},
  author={Bernt \Oksendal and Leif Sandal and Jan Ub\oe},
In this paper we prove a sufficient maximum principle for general stochastic differential Stackelberg games, and apply the theory to continuous time newsvendor problems. In the newsvendor problem a manufacturer sells goods to a retailer, and the objective of both parties is to maximize expected profits under a random demand rate. Our demand rate is an Itô-Lévy process, and to increase realism information is delayed, e.g., due to production time. We provide complete existence and uniqueness… CONTINUE READING

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