IDEAS home Printed from
   My bibliography  Save this article

Imperfect Information and Dynamic Conjectural Variations


  • Michael H. Riordan


This article analyzes oligopoly interaction in an environment where firms are imperfectly informed about the evolution of the market demand curve. The analysis develops a two-period Cournot framework under the assumptions that demand shifts are positively serially correlated, that firms never directly observe the demand curve, and that firms never observe the previous quantity decisions of rivals. Firms do draw inferences about the position of the demand curve from past observations on prices. Consequently, the current output of a firm will influence the current market price, which will then influence rivals' inferences about future demand. The future output decisions of rivals will respond accordingly. The theory predicts negative dynamic conjectural variations. Essentially, a firm perceives that an increase in its output will lower the current market-clearing price, which will cause rival firms to think that the demand curve has shifted down and hence induce them to lower their outputs in the future.

Suggested Citation

  • Michael H. Riordan, 1985. "Imperfect Information and Dynamic Conjectural Variations," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 41-50, Spring.
  • Handle: RePEc:rje:randje:v:16:y:1985:i:spring:p:41-50

    Download full text from publisher

    File URL:
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:16:y:1985:i:spring:p:41-50. 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: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.