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A Dynamic Theory of Conjectural Variations

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  • Dockner, Engelbert J.

Abstract

This paper explores the relationship between dynamic oligopolistic competition and static conjectural variations equilibria. Using an infinite horizon adjustment cost model, the author demonstrates that any steady state closed-loop (subgame-perfect) equilibrium coincides with a conjectural variations equilibrium. In the case of linear demand and quadratic costs, the dynamic conjectures consistent with closed-loop steady state equilibria are negative, constant, symmetric, and vary continuously with the discount rate (and the adjustment cost parameter) in an interval between the static consistent conjectures and zero (Cournot). Copyright 1992 by Blackwell Publishing Ltd.
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Suggested Citation

  • Dockner, Engelbert J., 1991. "A Dynamic Theory of Conjectural Variations," Department of Economics Working Paper Series 4, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus005:6277
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