On a game in manufacturing

We analyse a non-zero sum two-person game introduced by Teraoka and Yamada to model the strategic aspects of production development in manufacturing. Tn particular we investigate how sensitive their solution concept (Nash equ ilibrium) is to small variations in their assumptions. It is proved that a Nash equilibrium is unique if it exists and that a Nash equilibrium exists when the capital costs of the players are zero or when the players are equa l in every respect. However, when the capital costs differ, in general a Na sh equilibrium exists only when the players' capital costs are high compare d to their profit rates.