Competitive supply behavior when price information is fuzzy |
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Authors: | Bernhard F Arnold Ingrid Größl Peter Stahlecker |
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Institution: | (1) Present address: Department of Economics, Institute for Statistics and Econometrics, University of Hamburg, Von-Melle-Park 5, D-20146 Hamburg, Germany;(2) Present address: HWP, Von-Melle-Park 9, D-20146 Hamburg, Germany |
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Abstract: | The theory of fuzzy sets is applied to the output decisions of a price-taking firm facing imprecise information about expected future prices. Accepting risk resulting from the randomness of prices, the manager is interested in expected profits only. Since the set of possible expected-price vectors is fuzzy, a suitable defuzzification strategy is defined in analogy to the pessimism-optimism index proposed by L. Hurwicz. It depends on the manager's willingness to accept surprises resulting from a deviation of the true expected prices from the values that guided output decisions. Despite a linear cost function, well specified solutions to the optimization problem are possible without resorting to capacity constraints. |
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Keywords: | fuzzy sets price uncertainty defuzzification strategy |
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