Nonlinear dynamics of a duopoly Stackelberg game with marginal costs

Abstract In this paper, the complex dynamics of a duopoly game with bounded rational players are investigated. The model of a dynamic production game is formulated in yield decision making process. A nonlinear Stackelberg system which describes the time evolution with marginal costs is analyzed and the stability situations of Nash equilibrium points are studied. Numerical simulations show a series of chaotic behaviors. The results demonstrate that complex dynamics of the game can be showed by simulating. As for the chaos emerged, effective method has been applied to force it back to stability.

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