Firms learning price in a monopolistic competition economic model

This paper aims to investigate the possibility for monopolistically competitive firms to set the price and the quantity of goods through a reinforcement learning approach. The model incorporates a set of firms that produce and sell differentiated goods in monopolistically competitive markets and households that supply different types of labor, purchase goods for consumption and hold money. The households behave optimally, maximizing their utility, while the firms learn their desired mark-up by a reinforcement learning algorithm in order to set the price.