On the effects of conjectures in a symmetric strategic setting
This paper deals with the effect of conjectures in a strategic setting.To do this it focuses on the so-called Conjectural Variation Equilibrium (CVE).According to this concept, each agent chooses his most favorable action taking into account that rival strategies are a conjectured function of his own strategy. In the existing literature, a central role is played by the comparison between the CVE and the NASH Equilibrium (NE). The purpose of such a comparison is to appraise the impact of non zero conjectures on agents'behaviors.The existing results suggest that it is not possible to know, in advance, the consequences of non zero conjectures on behaviors. Our aim is: i) to identify situations where it is indeed possible, a priori, to know which kind of non cooperative concept Pareto dominates the other, ii) to provide out the corresponding theoretical explanations. The economic situations can be divided into two families, depending on whether they admit a stable Nash equilibrium and an interior Pareto situation (family 1) or not (family 2). Within each family it is shown that the sign of the externalities (positives or negative effect of the rival actions on a player's payoffs) together with the properties of conjectures (their sign and their absolute value): i) indicates how to rank the action levels associated with the NE and the CVE, ii) allows one to predict which kind of behavior leads the players to the most favorable outcome. It turns out that the qualitative results prevailing for family 1 are reversed for the family 2. This classification is useful in that outcomes and payoffs need not be calculated to assess the impact of conjectures on players'payoffs; the only relevant pieces of information are the sign of second order derivatives of the payoff function and the properties of conjectures, i.e. the description of the game. We then study in which kind of game reasonable conjectures, i.e. consistent conjectures, belongs to the set of conjectures that produces
(This abstract was borrowed from another version of this item.)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laitner, John, 1980. ""Rational" Duopoly Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 641-62, December.
- Bresnahan, Timothy F, 1981. "Duopoly Models with Consistent Conjectures," American Economic Review, American Economic Association, vol. 71(5), pages 934-45, December.
- Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, vol. 63(5), pages 1161-80, September.
- P. Diamond, 1980.
"Aggregate Demand Management in Search Equilibrium,"
268, Massachusetts Institute of Technology (MIT), Department of Economics.
- BOYER, Marcel & MOREAUX, Michel, .
"Conjectures, rationality and duopoly theory,"
CORE Discussion Papers RP
-517, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Sugden, Robert, 1985. "Consistent conjectures and voluntary contributions to public goods: why the conventional theory does not work," Journal of Public Economics, Elsevier, vol. 27(1), pages 117-124, June.
- Martin K. Perry, 1982. "Oligopoly and Consistent Conjectural Variations," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 197-205, Spring.
- Jun-ichi Itaya & Koji Shimomura, 1999.
"A Dynamic Conjectural Variations Model in the Private Provision of Public Goods: a Differential Game Approach,"
Discussion Paper Series
104, Research Institute for Economics & Business Administration, Kobe University.
- Itaya, Jun-ichi & Shimomura, Koji, 2001. "A dynamic conjectural variations model in the private provision of public goods: a differential game approach," Journal of Public Economics, Elsevier, vol. 81(1), pages 153-172, July.
- Drew Fudenberg & David K. Levine, 1993.
Levine's Working Paper Archive
2147, David K. Levine.
- Itaya, Jun-ichi & Dasgupta, Dipankar, 1995. "Dynamics, Consistent Conjectures, and Heterogeneous Agents in the Private Provision of Public Goods," Public Finance = Finances publiques, , vol. 50(3), pages 371-89.
- Drew Fudenberg & David M. Kreps, 2010. "Learning, Experimentation and Equilibrium in Games," Levine's Working Paper Archive 218, David K. Levine.
- Wildasin, David E., 1991. "Some rudimetary 'duopolity' theory," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 393-421, November.
- John C. Harsanyi, 1967. "Games with Incomplete Information Played by "Bayesian" Players, I-III Part I. The Basic Model," Management Science, INFORMS, vol. 14(3), pages 159-182, November.
- Sugden, Robert, 1982. "On the Economics of Philanthropy," Economic Journal, Royal Economic Society, vol. 92(366), pages 341-50, June.
- BOYER, Marcel & MOREAUX, Michel, .
"Consistent versus non-consistent conjectures in duopoly theory: some examples,"
CORE Discussion Papers RP
-544, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Boyer, Marcel & Moreaux, Michel, 1983. "Consistent versus Non-Consistent Conjectures in Doupoly Theory: Some Examples," Journal of Industrial Economics, Wiley Blackwell, vol. 32(1), pages 97-110, September.
- Boyer, M. & Moreaux, M., 1982. "Consistent Versus Non-Consistent Conjectures in Duopoly Theory: Some Examples," Cahiers de recherche 8206, Universite de Montreal, Departement de sciences economiques.
- Friedman, James W. & Mezzetti, Claudio, 2002. "Bounded rationality, dynamic oligopoly, and conjectural variations," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 287-306, November.
- repec:cup:cbooks:9780521797962 is not listed on IDEAS
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
- Dockner, Engelbert J, 1992. "A Dynamic Theory of Conjectural Variations," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 377-95, December.
- Kalai, Ehud & Lehrer, Ehud, 1993.
"Subjective Equilibrium in Repeated Games,"
Econometric Society, vol. 61(5), pages 1231-40, September.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
- Morton I. Kamien & Nancy L. Schwartz, 1983. "Conjectural Variations," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 191-211, May.
- Bordignon, Massimo, 1994. "A further look at consistent conjectures and private provision of public goods," Ricerche Economiche, Elsevier, vol. 48(2), pages 109-121, June.
- John C. Harsanyi, 1968. "Games with Incomplete Information Played by "Bayesian" Players Part II. Bayesian Equilibrium Points," Management Science, INFORMS, vol. 14(5), pages 320-334, January.
- John C. Harsanyi, 1968. "Games with Incomplete Information Played by `Bayesian' Players, Part III. The Basic Probability Distribution of the Game," Management Science, INFORMS, vol. 14(7), pages 486-502, March.
- Margaret E. Slade, 1995. "Empirical Games: The Oligopoly Case," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 368-402, May.
When requesting a correction, please mention this item's handle: RePEc:eee:reecon:v:58:y:2004:i:1:p:75-102. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.