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A robust route to randomness in a simple Cournot duopoly game where ambiguity aversion meets constant expectations

Author

Listed:
  • D. Radi

    (Catholic University of the Sacred Heart
    Technical University of Ostrava)

  • L. Gardini

    (University of Urbino Carlo Bo)

  • D. Goldbaum

    (University of Technology Sydney)

Abstract

In this paper we investigate the dynamics of a duopoly game with ambiguity aversion regarding uncertainty in demand and constant expectations concerning competitor production. The focus is on an asymmetric Cournot game where players engage in robust optimization and have different beliefs about the possible realizations of the random parameters of the price function. The players’ ambiguity aversion introduces multiple equilibria and instability that otherwise would not be present. The investigation of the global dynamics of the game reveals the emergence, through border-collision bifurcations, of periodic and chaotic dynamics.

Suggested Citation

  • D. Radi & L. Gardini & D. Goldbaum, 2024. "A robust route to randomness in a simple Cournot duopoly game where ambiguity aversion meets constant expectations," Annals of Operations Research, Springer, vol. 337(3), pages 769-807, June.
    • Handle: RePEc:spr:annopr:v:337:y:2024:i:3:d:10.1007_s10479-023-05686-8
    DOI: 10.1007/s10479-023-05686-8
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