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Conjectural Variations and Evolutionary Stability: A Rationale for Consistency

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  • Wieland Müller
  • Hans-Theo Normann

Abstract

Adopting an evolutionary approach, we explain the conjectural variations firms may hold in duopoly. Given conjectures, firms play the market game rationally. Success in the market game determines fitness in the evolutionary game. Based on linear heterogeneous Cournot and Bertrand competition models, we show that the unique conjectures that are evolutionarily stable are consistent in that they anticipate the rival's behavior correctly.

Suggested Citation

  • 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.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200509)161:3_491:cvaesa_2.0.tx_2-g
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    References listed on IDEAS

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    Cited by:

    1. Paulo Brito & Bipasa Datta & Huw Dixon, 2011. "The evolution of mixed conjectures in the rent-extraction game," Discussion Papers 11/06, Department of Economics, University of York.
    2. N. Quérou & M. Tidball, 2014. "Consistent conjectures in a dynamic model of non-renewable resource management," Annals of Operations Research, Springer, vol. 220(1), pages 159-180, September.
    3. Prof. Jean-Paul Chavas, 2010. "On Industry Structure and Firm Conduct in Long Run Equilibrium," Journal of Management and Strategy, Journal of Management and Strategy, Sciedu Press, vol. 1(1), pages 2-21, December.
    4. Possajennikov, Alex, 2015. "Conjectural variations in aggregative games: An evolutionary perspective," Mathematical Social Sciences, Elsevier, vol. 77(C), pages 55-61.
    5. Possajennikov, Alex, 2009. "The evolutionary stability of constant consistent conjectures," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 21-29, October.
    6. Leppänen, Ilkka, 2016. "Consistent conjectures and the evolutionary stability of other-regarding preferences," Economics Letters, Elsevier, vol. 142(C), pages 53-55.
    7. Roberto Cellini & Fabio Lamantia, 2015. "Quality competition in markets with regulated prices and minimum quality standards," Journal of Evolutionary Economics, Springer, vol. 25(2), pages 345-370, April.
    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. 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.
    10. 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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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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