The equilibrium of cloud manufacturing system under cost uncertainty

Abstract

In this paper, we explore the equilibrium problem of cloud manufacturing system (CMfgS) with cost uncertainty. We propose a CMfgS supernetwork model in which decision-makers (resource service providers (RSPs), the agent and resource service demanders (RSDs)) seek to determine their optimal behavior in an environment with cost uncertainty. The cost uncertainty is represented by random variables and the decision-makers' risk aversion attitude is modeled by adopting mean-variance utility. The equilibrium conditions governing the supernetwork model are proposed based on variational inequalities. To investigate the impacts of decision-makers' risk aversion attitude and the degree of cost uncertainty on equilibrium of CMfgS, we conduct a numerical analysis in this study. The results indicate that a risk averse RSP (or agent) tends to raise selling price to mitigate risk, and a risk averse RSD is willing to pay more for the needed services . We also show that a risk neutral RSP could sell more services when the variance of cost distribution is relative large but the opposite occurs for risk averse RSPs.