Assessing the Validity of Zero Conjectural Variation Hypotheses in Competition in Nigerian Sugar Industry

C. Chris Ofonyelu ()
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C. Chris Ofonyelu: Department of Economics, Adekunle Ajasin University, Akungba Akoko, Ondo State, Nigeria

Research in Applied Economics, 2014, vol. 6, issue 4, 95-105

Abstract: The crux of Cournot and Bertrand theory of industrial relationship is based on zero conjectural variation in output and Prices. The two theories assume that firms form constant expectations about their rival¡¯s reaction during output and price competition. This study examined the validity of zero conjectural variation hypotheses within the context of the competition in Nigerian sugar industry. Using a two-stage least square analogy and data of wholesale sugar prices between January 2007 and June 2014, the study examined the interrelationships in the firms¡¯ price and output competition. Evidence from the study showed positive conjectural variation among the sugar firms, suggesting that output and price of rival firms varied with competition. The strong interdependency among the sugar firms suggests a continued long run competition and stable price in the industry.

Keywords: Cournot theory; Bertrand theory; Conjectural variation; Collusion (search for similar items in EconPapers)
Date: 2014
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