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Are 'Rational Conjectures' Rational?

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  • Makowski, Louis

Abstract

The concepts of "rational conjectures" and "reasonable conjectures" are cr itically reviewed. It is shown that their operation depends crucially on an invisible, nonoptimizing "deus ex machina." Hence, these con cepts are not really suitable for understanding competition among opt imizing firms. In addition, the widely claimed "fact" that Bertrand conjectures are locally rational conjectural variations is shown to be erroneous. Copyright 1987 by Blackwell Publishing Ltd.

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  • Makowski, Louis, 1987. "Are 'Rational Conjectures' Rational?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 35-47, September.
    • Handle: RePEc:bla:jindec:v:36:y:1987:i:1:p:35-47
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    Citations

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    Cited by:

    1. Holloway, Garth J., 1992. "Consistent Conjectures In Symmetric Equilibria," Working Papers 225873, University of California, Davis, Department of Agricultural and Resource Economics.
    2. Henrik Vetter, 2014. "Ad Valorem versus Unit Taxes in Oligopoly and Endogenous Market Conduct," Public Finance Review, , vol. 42(4), pages 532-551, July.
    3. Huppmann, Daniel, 2013. "Endogenous shifts in OPEC market power - A Stackelberg oligopoly with fringe," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79758, Verein für Socialpolitik / German Economic Association.
    4. Holloway, Garth J. & Hertel, Thomas W., 1991. "Comparing Hypotheses About Competition," Working Papers 225867, University of California, Davis, Department of Agricultural and Resource Economics.
    5. Alex Possajennikov, 2016. "Evolution of Consistent Conjectures in Semi-Aggregative Representation of Games, with Applications to Public Good Games and Contests," Discussion Papers 2016-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    6. Ibrahim Abada & Andreas Ehrenmann, 2016. "The prisoner’s dilemma in Cournot models: when endogenizing the level of competition leads to competitive behaviors," Cambridge Working Papers in Economics 1641, Faculty of Economics, University of Cambridge.
    7. Leppänen, Ilkka, 2016. "Consistent conjectures and the evolutionary stability of other-regarding preferences," Economics Letters, Elsevier, vol. 142(C), pages 53-55.
    8. Matthew McGinty, 2021. "Rational conjectures and evolutionary beliefs in public goods games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1130-1143, December.
    9. Friedman, James W. & Mezzetti, Claudio, 2002. "Bounded rationality, dynamic oligopoly, and conjectural variations," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 287-306, November.
    10. Carlo Russo, 2012. "Estimating Market Power with Weak A Priori Information: An Exploratory Approach to the Model-Specification Problem," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 339-354, June.
    11. Iskakov, A. & Iskakov, M., 2017. "In Search of a Generalized Concept of Rationality," Journal of the New Economic Association, New Economic Association, vol. 34(2), pages 181-189.
    12. Omid Zamani & Thomas Bittmann & Jens‐Peter Loy, 2024. "Does the internet bring food prices closer together? Exploring search engine query data in Iran," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(2), pages 688-715, June.
    13. Dixon, Huw D. & Somma, Ernesto, 2003. "The evolution of consistent conjectures," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 523-536, August.
    14. Grieco, Paul & Pinkse, Joris & Slade, Margaret, 2018. "Brewed in North America: Mergers, marginal costs, and efficiency," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 24-65.
    15. Holloway, Garth J., 1995. "Conjectural Variations With Fewer Apologies," Working Papers 225880, University of California, Davis, Department of Agricultural and Resource Economics.
    16. Robert Driskill & Stephen McCafferty, 1989. "Dynamic Duopoly with Output Adjustment Costs in International Markets: Taking the Conjecture out of Conjectural Variations," NBER Chapters, in: Trade Policies for International Competitiveness, pages 125-144, National Bureau of Economic Research, Inc.
    17. Wieland Müller & Hans-Theo Normann, 2005. "Conjectural Variations and Evolutionary Stability: A Rationale for Consistency," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 491-502, September.
    18. Holloway, Garth J., 1993. "Admissible Conjectures and Consistent Conjectures," 1993 Annual Meeting, August 1-4, Orlando, Florida 271403, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. Holloway, Garth J., 1992. "The Representative Firm, Endogenous Output Decisions And Consistent Conjectural Variations In Oligopoly," Working Papers 225876, University of California, Davis, Department of Agricultural and Resource Economics.
    20. Holloway, Garth J., 1994. "Consistent Comparative Statics For The Food Industries," 1994 Annual Meeting, August 7-10, San Diego, California 271418, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    21. Possajennikov, Alex, 2015. "Conjectural variations in aggregative games: An evolutionary perspective," Mathematical Social Sciences, Elsevier, vol. 77(C), pages 55-61.
    22. Flavio M. Menezes & John Quiggin, 2023. "Competition in supply functions and conjectural variations: a unified solution," Australian Institute for Business and Economics DP012023, School of Economics, University of Queensland, Australia.
    23. Ilkka Leppänen, 2018. "Evolutionarily stable conjectures and other regarding preferences in duopoly games," Journal of Evolutionary Economics, Springer, vol. 28(2), pages 347-364, April.

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