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When Muth’s entrepreneurs meet Schrödinger’s cat

Lorsque les entrepreneurs de Muth croisent le chat de Schrödinger

Rodolphe Dos Santos Ferreira

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Abstract: In his 1961 seminal paper, Muth applied his "rational expectations" hypothesis to a simple model of a competitive market for a homogeneous good produced under random shocks. The hypothesis goes beyond the Marshallian expectational approach to equilibrium in attributing to entrepreneurs the capacity to form theory-based price predictions. We find this capacity already in Cournot [1838], although in a model without explicit fundamental uncertainty. The purpose of this note is to show within the same model that oligopolistic competition adds indeterminacy, hence market uncertainty, to the picture, weakening in some sense the rational expectations hypothesis. Before equilibrium is realised, each entrepreneur stands in a hawkish-dovish superposition, very much as the Schrödinger's cat is in a dead-living superposition.

Keywords: Comptetitive toughness; Oligopoly; Market uncertainty; Rational expectations; Equilibrium indeterminacy; Anticipations rationnelles; Incertitude stratégique; Oligopole; Indétermination de l’équilibre; Agressivité concurrentielle (search for similar items in EconPapers)
Date: 2021-07-06
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Published in Revue d'économie politique, 2021, 131 (3), pp.449-459. ⟨10.3917/redp.313.0131⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03595143

DOI: 10.3917/redp.313.0131

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