In an economy with very many agents the market environment of any one of these is independent of the market actions he decides upon. More generally one can characterize an economy as perfectly competitive if the removal of any one agent from the economy would leave the remaining agents just as well off as they were before his removal. (The economy is said to satisfy a ‘no surplus’ condition; see Makowski, 1980; and Ostroy, 1980.) When an economy is not perfectly competitive, an agent in making a decision must take note of its effect on his market environment, for example, the price at which he can sell. This effect may not be known (or known with certainty) and will therefore be the subject of conjecture. A conjecture differs from expectations concerning future market environments which may, say, be generated by some stochastic process. It is concerned with responses to the actions of the agent.
Unable to display preview. Download preview PDF.
- Arrow, K.J. 1959. Toward a theory of price adjustment. In M. Abramovitz et al., The Allocation of Economic Resources, Stanford: Stanford University Press, 41–51.Google Scholar
- Bresnahan, T.F 1981. Duopoly models with consistent conjectures. American Economic Review 71(5), 934–45.Google Scholar
- Hart, O. 1982. Reasonable conjectures. Suntory Toyota Centre for Economics and Related Disciplines. London School of Economics.Google Scholar
- Makowski, L. 1983. ‘Rational conjectures’ aren’t rational and ‘reasonable conjectures’ aren’t reasonable. SSRC Project on Risk, Information and Quantity Signals. Cambridge University Discussion Paper 60.Google Scholar
- Negishi, T. 1979. Micro-Economic Foundations of Keynesian Macro-Economics. Amsterdam: North-Holland.Google Scholar
- Triffin, R. 1940. Monopolistic Competition and General Equilibrium Theory. Cambridge: Mass.: Harvard University Press.Google Scholar