Endogenous conjectural variations in oligopoly

Joel M. Guttman, Michael Miller

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

Conventional oligopoly theories provide no mechanism for oligopolists to learn from their experience of other firms' behavior in forming conjectural variations. This paper explores two approaches to the solution of this problem. In the first (the 'consistent conjectures' approach), oligopolists passively react to changes in other firms' outputs, so as to keep their own profits at a maximum. Other firms correctly anticipate these reactions. In the second approach (the 'matching behavior' approach), firms actively choose reactions which will induce other firms to reduce their outputs. Again, these reactions are correctly anticipated by the other firms. The implications of these alternative models are derived, and contrasted with the implications of the Cournot and joint-profit maximization models.

Original languageEnglish
Pages (from-to)249-264
Number of pages16
JournalJournal of Economic Behavior and Organization
Volume4
Issue number2-3
DOIs
StatePublished - 1983

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