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Note on Cournot Competition Under Yield Uncertainty

Author

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  • Maria C. Jansen

    (Edward P. Fitts Department of Industrial and Systems Engineering, North Carolina State University, Raleigh, North Carolina 27695)

  • Osman Y. Özaltın

    (Edward P. Fitts Department of Industrial and Systems Engineering, North Carolina State University, Raleigh, North Carolina 27695)

Abstract

Inspired by the U.S. influenza vaccine market, we formulate a Cournot competition model with asymmetric firms facing capacity constraints and yield uncertainty. We derive the equilibrium of this model by defining a score that ranks firms based on their capacity, unit production cost, random yield mean, and variance. In particular, we show a threshold structure. Firms that have scores above a threshold produce at full capacity, while other firms produce less than their capacities in the equilibrium. Finally, for the case of symmetric firms, we correct mistakes in the analysis of Deo and Corbett [Deo S, Corbett CJ (2009) Cournot competition under yield uncertainty: The case of the U.S. influenza vaccine market. Manufacturing Service Oper. Management 11(4):563–576], showing that society can benefit from supplier diversification under weaker conditions.

Suggested Citation

  • Maria C. Jansen & Osman Y. Özaltın, 2017. "Note on Cournot Competition Under Yield Uncertainty," Manufacturing & Service Operations Management, INFORMS, vol. 19(2), pages 305-308, May.
    • Handle: RePEc:inm:ormsom:v:19:y:2017:i:2:p:305-308
    DOI: 10.1287/msom.2016.0610
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    References listed on IDEAS

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    Cited by:

    1. Yixuan Xiao, 2020. "Horizontal Mergers under Yield Uncertainty," Production and Operations Management, Production and Operations Management Society, vol. 29(1), pages 24-34, January.
    2. Chen, You-hua & Huang, Sun-jun & Mishra, Ashok K. & Wang, X. Henry, 2018. "Effects of input capacity constraints on food quality and regulation mechanism design for food safety management," Ecological Modelling, Elsevier, vol. 385(C), pages 89-95.
    3. Yang, Xuenan & Peng, Yu & Xiao, Yue & Wu, Xue, 2019. "Nonlinear dynamics of a duopoly Stackelberg game with marginal costs," Chaos, Solitons & Fractals, Elsevier, vol. 123(C), pages 185-191.
    4. Zheng, Zhong & Chen, Zhiyuan & Savaser, Sinem Kinay, 2021. "The implications of contract timing on a supply chain with random yield," International Journal of Production Economics, Elsevier, vol. 240(C).

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