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| Ludovic A. Julien, Olivier Musy and Aurélien W. Saidi |
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| ''The Stackelberg equilibrium as a consistent conjectural equilibrium'' |
| ( 2011, Vol. 31 No.1 ) |
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| We 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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| Keywords: Consistent conjectural variations, reaction functions, Stackelberg competition |
JEL: D4 - Market Structure and Pricing: General
L1 - Market Structure, Firm Strategy, and Market Performance: General |
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| Manuscript Received : Oct 29 2010 | | Manuscript Accepted : Mar 21 2011 |
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