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The Stackelberg equilibrium as a consistent conjectural equilibrium

Ludovic Julien, Olivier Musy and Aurélien Saidi ()
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Aurélien Saidi: Information & Operations Management Department, ESCP Europe

Economics Bulletin, 2011, vol. 31, issue 1, 938-949

Abstract: 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.

Keywords: Consistent conjectural variations; reaction functions; Stackelberg competition (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Date: 2011-03-21
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