The Analysis of Industry Equilibrium : A Theoretical Perspective
The paper criticises the conjectural variation model for saying little about the determinants of industry equilibrium. It therefore examines more closely the behaviour underlying firms' actions. Collusion amongst firms focusing on the possibility of joint profit maximisation is brought to the centre of the analysis. It is suggested that industry equilibrium be analysed in terms of its deviation from the joint profit maximum, the deviation depending upon firms' retailiatory power, cost functions, and demand functions. This is illustrated by examining the formal specification of a firm's price-cost margin.
|Date of creation:||1983|
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