The Cournot production game with multiple firms under an ambiguous decision environment

Abstract

The recent economic recession has added more uncertainty to industries' decision processes regarding production quantity. Moreover, due to the nature of ambiguous information, manufacturers often fail to achieve precise assessments of the parameters of market demand, production cost functions, etc. This paper develops the Cournot production game with multiple firms in an ambiguous decision environment, where the form of ambiguity is described by a set of fuzzy parameters. Our model applies the weighted center of gravity method (WCoG) to defuzzify the fuzzy profit function considering firms' control parameters. The resulting outcomes are in the form of matrix representations. We also analyze the effect of firms' control parameters on outcomes. The results indicate that a firm's fuzzy profit function plays an important role in economic interpretation. To investigate the effect of parameter perturbations on firms' outcomes, we also conduct the sensitivity analysis. (C) 2014 Elsevier Inc. All rights reserved.