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

D. Radi (), L. Gardini and David Goldbaum
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D. Radi: Catholic University of the Sacred Heart
L. Gardini: University of Urbino Carlo Bo

Annals of Operations Research, 2024, vol. 337, issue 3, No 3, 769-807

Abstract: 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.

Keywords: Cournot duopoly; Ambiguity aversion; Constant expectations; Piecewise linear maps; Border collision bifurcations (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10479-023-05686-8

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