This view of conjectural variations is the same as examined in riordan 1985, the di. This book presents, for the first time, a comprehensive. In this article, the authors investigate competitive firm behaviors in a twofirm environment assuming linear cost and demand functions. Abstract the paper introduces the conjectural variations and bargaining approaches into a vertical model wherein a. This paper covers the debate on the conjectural variations approach to duopolistic competition in the period from 1924 to 1949. For instance, in a symmetric linear demand cournot duopoly. The effects of government policies are analyzed in a conjectural variations model of u. Conjectural variations, symmetric equilibria and economic. This study presents an oligopolistic conjectural variation model of electiricty markets. Price conjectural variations are estimated to measure the degree of price competition in a product differentiated oligopoly. Competitiveness and conjectural variation in duopoly markets. Regarding competition, the nash equilibrium effect is twoedged. Irrelevance of conjectural variation in a private duopoly. As it happens, the output and price levels generated by the extremes of this conjectural variation range correspond to the outputs and prices of firms operating at the opposite ends of the competitivemonopoly spectrum.
Chapter 1 introduction industrial organization1, industrial economics, oligopoly, imperfect competi tion. Conjectural variations, symmetric equilibria and economic policy. Various downstream firms competition modes and upstreams pricing schemes emerge as special cases of this formulation. The competitive effects of buyer groups click here. The impact of risk pricing on profit maximization of. The main conclusion has been that, by creating tacit collusion, the cv leads to less competitive outcomes. This paper provides such a treatment, derives from it several basic comparative statics and draws out from these several implications for competition and selection policy that contrast with the conventional wisdom in these areas. Selective price cuts and fidelity rebates click here, annexes click here. Request pdf conjectural variations, market power, and optimal trade policy in a vertically related industry the paper introduces the conjectural variations and. Request pdf conjectural variations, symmetric equilibria and economic policy in this paper, we consider conjectural variations in a simple static general equilibrium model under oligopolistic. Theory and empirical techniques click here the competitive effects of buyer groups click here selective price cuts and fidelity rebates click here, annexes click here the efficiencyenhancing effects of nonhorizontal mergers click here.
In particular, we are interested in the longrun steady state equilibrium of the dynamic game and compare it to a conjectural variations equilibrium of the corresponding static. An oligopolistic conjectural variation model of the nordic. Various downstream firms competition modes and upstreams pricing schemes emerge as special cases of this. Pdf competition on the cost frontier and intertemporal. The price paid for insurance, called the premium, is the rate per unit or coverage. Empirical studies of strategic trade policy volume authoreditor. Conjectural variations are based on the assumption that each firm believes its own strategy influences its. The impact of risk pricing on profit maximization of insurance companies f m epetimehin phd. Notable values of the conjectural variations parameter are i 0, 1, ni, representing perfect competition, noncollusive cournot oligopoly or a colluding cartel. Price reaction functions and conjectural variations. First, it does not feature the role played by conjectural variations. A statement that is conjectural is based on information that is not certain or complete. A conjectural variations model of strategic rivalry in. Conjectural variations equilibrium in a mixed duopoly.
Irrelevance of conjectural variation in a mixed duopoly. By introducing conjectural variations, they capture the different market structures as specific configurations of a more general model. Using a general conjectural variations model, this paper. Competitiveness and conjectural variation in duopoly. Furthermore, market distortions caused by strategic behaviors can be dampened by a tax policy through the multiplier mechanism. Competition, patent protection, and innovation in an. Conjectural variations and location theory conjectural variations and location theory greenhut, m. A conjectural variations model of strategic rivalry in state. The empirical model is a simultaneous equation system of product demand and price reaction functions in which own and cross price elasticities of demand are estimated in conjunction with price conjectural variations. Shalom feldblum is an associate actuary with the liberty mutual insurance company in emon, massachusetts. Other studies specified different models of competition, including conjecturalvariations cournot models to test for pricetaking versus pricesetting behavior e. Underwriting cycles and business strategies biography.
This paper explores the equilibrium market outcomes in the contexts of both quantitysetting and pricesetting private duopolies with the consistent conjectures of two private firms, wherein they maximize the weighted sum of their own profits and their respective opponent firms profit. Conjectural variations have already been introduced in a one sector imperfect competition model with wagebargaining in the labor market in order to capture their in. Nevertheless, the preceding approach includes three shortcomings. The cournot, bertrand, and stackelberg models can be interpreted as conjectural variations models rather than as game theory models. To fully understand the impacts and policy implications of conjectural variation, one must first understand the part it played in the great indeterminacy debate within marginal economics during the first half of the 20th century. An application to the us cheese market using a general conjectural variations model, this paper shows that even though import tariffs may be justified where markets are imperfectly competitive, such a policy may be inferior to alternative forms of trade intervention. The paper introduces the conjectural variations and bargaining approaches into a vertical model wherein a foreign upstream firm supplies one input to two downstream firms that produce differentiated products for the export market. The policy elasticities of the perfectly competitive model are valid predictors of policy effects irrespective of the type of oligopoly. Someone should create a page on the cv model of oligopoly. Exploring duopoly markets with conjectural variations. Conjectural definition and meaning collins english. Explain conjectural variation in cournot duopoly, evaluate. The conjectural variations approach to duopoly theory conjecturizing cournot. Introduction to empirical studies of strategic trade policy.
If i have timne, i can do this, but would welcome others to do it. On 15 september 2011 rbb held a seminar at the uk office of fair trading presenting the findings of a recent report on the policy impact of conjectural var. We study a mixed duopoly model, in which a stateowned public firm maximizing domestic social surplus and a private foreign firm compete. Almunia delivers speech on competition policy and growth in romania on 21 october 2011, a speech on the role of competition policy in fuelling growth in romania was delivered by commission vice president responsible for competition policy, joaquin almunia. Using a conjectural variations model of strategic rivalry, the paper examines the implications of regional policies aimed at creating local employment, given that many regions are pursuing the same policies. The conjectural variations approach to duopoly theory giocoli, nicola 20030601 00. This reincarnation of an old idea, using a dynamic point of view, aims at combining the adequacy with facts to the requirements of a firmly grounded theory. This pdf is a selection from an outofprint volume from the national bureau of economic research volume title. Request pdf conjectural variations, market power, and optimal trade policy in a vertically related industry the paper introduces the conjectural variations and bargaining approaches into a. Changes in the degree of competition may alter the magnitude of the policy elasticities. Paul krugman and alasdair smith, editors volume publisher.
Duopoly, conjectural variations, cournot model, stackelberg model, consistent conjectures. This needs a history section including references, a mathematical derivation and some examples. The authors show that the optimal export policy of a downstream country depends crucially on the. He is most interested in the equilibrium values of the conjectural variation terms as implied by the historical data. Therefore, this paper shall begin with a short description and history of conjectural variation, followed by how the debates surrounding it led to the final. Among its results is an explanation for the recent, dramatic shift in regional policy emphasis at the local level from traditional locational subsidy scheme to create. Theory of conjectural variations series on mathematical. Under general enough assumptions, we first justify the concept of conjectural variations equilibrium cve applied to the model by demonstrating concavity of the expected profit function of each agent. Own and cross price demand elasticities are estimated in conjunction with the price conjectural variations and price reaction function. Introduction this paper covers the debate on the conjectural variations approach to duopolistic competition in the period from 1924 to 1949. The policies to be examined will be represented using a simple twoparameter framework. The model is based on model by sulamaa 25 and earlier models by bergman and andersson 5. Using 6, the consistency condition 7 can be written in terms of x, 6, and m as either.
This paper explores theoretical implications of the e. The paper introduces the conjectural variations and bargaining approaches into a vertical model, wherein a foreign upstream firm supplies one input to two downstream firms that produce differentiated products for the export market. They finally represent, analytically and graphically, the equilibrium strategies and the associated indexes in a unified framework for any level of competition. Dynamic duopoly with output adjustment costs in international.
The policy impact of conjectural variations seminar held. Own and cross price demand elasticities are estimated in conjunction with the price conjectural variations and price reaction function elasticities. From the perspective of the extended generalizedlerner index egli on the cost frontier, the following two points are noteworthy. Commission fines crt glass producers 129 million in fourth eu settlement. Conjectural variations and competition policy office of fair trading report, 2011. However, he does express some concern that such equilibrium conjectural variations might be functions of tariffs and other policy variables. It unravels the special features of the global socioeconomic system that can make it extremely fragile and vulnerable. Conjectural variations, market power, and optimal trade. Economywide analysis of regulatory and competition policy. Economywide analysis of regulatory and competition policy a.
He was graduated from harvard university in 1978 and spent the next two years as a visiting fellow at the hebrew university in jerusalem. Among its results is an explanation for the recent, dramatic shift in regional policy emphasis at the local level from traditional locational subsidy scheme to create jobs to policies that. See perry 1979 or seade 1980 for basic treatments of the conjectural variation model. The authors approach fully encompasses the standard measures of market power the lerner index and concentration the herfindahl index, both depending on the conjectural variations. The measurement of conjectural variations in an oligopoly. Imperfectly competitive markets, such as those involving spatial separation of producers and consumers are characterized by interactions between competing firms.
Similar to the private duopoly without network effects wherein the two private firms maximize. Conjectural variations and location theory, journal of. The empirical model is a simultaneous equation system of product demand and price reaction functions. The topic of conjectural variations in oligopolistic markets has been investigated for a long time. When the degree of competition is parameterized by conjectural variations, three symmetric general equilibria can occur. All these are well known labels to address one of the oldest problems in economics, namely how prices arise in the market when there are few competitors. The focus is on the evolution of economists views about the imposition of a consistency condition upon firms conjectures in order to obtain a determinate solution to the duopoly model.
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