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Cambridge Journal of Economics Advance Access originally published online on February 7, 2005
Cambridge Journal of Economics 2005 29(4):601-618; doi:10.1093/cje/bei007
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

The escape from conjectural variations: the consistency condition in duopoly theory from Bowley to Fellner

Nicola Giocoli*

* University of Pisa

Address for correspondence: Department of Economics, University of Pisa, Via Curtatone e Montanara 15, 56126 Pisa, Italy; email: giocoli{at}mail.jus.unipi.it.

The paper covers the 1924–1949 debate on the conjectural variations approach to duopoly theory and focuses on the evolution of economists' views about the imposition of a consistency condition on the firms' conjectures. The main point is that, although the consistency condition entailed a notion of interactive equilibrium that resembled the modern correct conjectures equilibrium, most neoclassical economists of the time refused to apply it because of the excessive requirements it imposed upon the firms' forecasting abilities, and because of its failure to encompass an explanation of the equilibrating process.

Key Words: Duopoly • Conjectural variations • Cournot model • Stackelberg model • Consistent conjectures

JEL classifications: B21, D43

Manuscript received November 25, 2002; final version received April 5, 2004.


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