How to Choose in theory
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- Bowley (1924) offered a model of conjectural variation that
"nests" the Cournot and Bertrand models, as well as perfect
collusion ("shared monopoly").
- Bresnahan (1981) showed that the idea of consistent conjectural
variation leads to a unique outcome.
- But game theorists don't like this model.
- Robson (1981) offered an alternative model of linear supply
function competition which gives the perfect competition solution
with constant marginal cost.
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