Analysis of Markovian Competitive Situations using Nonatomic Games—the Shock-driven Case and Its Dynamic Pricing Application

We show that equilibria derived for nonatomic games (NGs) can be used by large fi-nite games to achieve near-equilibrium performances. Rather than single-period games, we deal with dynamic games in which the evolution of a player’s state is influenced by his own action as well as other players ’ states and actions. We focus on the case where both random state transitions and random actions are driven by independently generated shocks. The NG equilibria we consider are random state-to-action maps. The simple NG equilibria are adoptable to a variety of real situations where awareness of other players ’ states can be anywhere between full and none. Transient results here also form the basis for a link between an NG’s stationary equilibrium (SE) and good stationary profiles for large finite games. Our approach works well for certain dynamic pricing games, both without and with production