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ERIC Number: EJ1042630
Record Type: Journal
Publication Date: 2014
Pages: 17
Abstractor: As Provided
Reference Count: 21
ISSN: ISSN-0022-0485
Exploring Duopoly Markets with Conjectural Variations
Julien, Ludovic A.; Musy, Olivier; Saïdi, Aurélien W.
Journal of Economic Education, v45 n4 p330-346 2014
In this article, the authors investigate competitive firm behaviors in a two-firm environment assuming linear cost and demand functions. By introducing conjectural variations, they capture the different market structures as specific configurations of a more general model. Conjectural variations are based on the assumption that each firm believes its own strategy influences its rival's strategy. Firms derive their optimal choice from these exogenous conjectures, under the form of a conjectural best-response function. 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. They finally represent, analytically and graphically, the equilibrium strategies and the associated indexes in a unified framework for any level of competition, ranging from perfect competition to collusion.
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Publication Type: Journal Articles; Reports - Evaluative
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A