Oligopoly and Consistent Conjectural Variations

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Abstract

This article examines "consistent" conjectural variations in an oligopoly model with a homogeneous product. A conjectural variation is consistent if it is equivalent to the optimal response of the other firms at the equilibrium defined by that conjecture. When the number of firms is fixed, we find that competitive behavior is consistent when marginal costs are constant, but that when marginal costs are rising, the consistent conjectural variation will be between competitive and Cournot behavior. Finally, if we allow free entry and redefine consistency to account for such, then only competitive behavior will be consistent.
Original languageEnglish (US)
Pages (from-to)197-205
JournalThe Bell Journal of Economics
Volume13
Issue number1
DOIs
StatePublished - 1982

Keywords

  • marginal costs
  • duopolies
  • Nash equilibrium
  • industrial output
  • industrial market
  • economic models
  • cost functions
  • glass industry
  • air transportation industry

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