Dynamic Oligopolistic Competition with Uncertainty and Supply Disruption Effects

Abstract

We consider a finite-horizon discrete-time dynamic model of oligopolistic competition, with uncertain supply. The firms (retailers) make their decisions on quantities (sales) and orders of goods from a nonstrategic manufacturer taking into account uncertainty in demand parameters and available supply capacity. The retailers need to satisfy the joint available supply capacity constraint. The model is described as a game played over an event tree with given transition probabilities. We find a normalized equilibrium for the game with coupling constraints. The two-step procedure to find this equilibrium is described. We provide the necessary conditions of the equilibrium and examine different scenarios of uncertainties in the model by numerical simulations.