The Stackelberg equilibrium as a consistent conjectural equilibrium
AbstractWe consider a static game with conjectural variations where some firms make conjectures while others do not. Two propositions are proved. We first show that there exists a continuum of conjectural variations such that the conjectural equilibrium locally coincides with the Stackelberg equilibrium (Proposition 1). Second, we define the conditions under which a conjectural equilibrium is a locally consistent equilibrium (i.e. such that conjectures are fulfilled). The concept of (local) consistency is restricted to firms making conjectures. Two conditions on consistency are featured: consistency within a cohort and consistency among cohorts. The Stackelberg equilibrium fulfills only the latter condition (Proposition 2). An example is provided.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 31 (2011)
Issue (Month): 1 ()
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Consistent conjectural variations; reaction functions; Stackelberg competition;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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