AN OPERATIONAL THEORY OF OLIGOPOLY,
Abstract
A method has been developed for determining optimal price policies for an individual firm in an undifferentiated oligopoly without communication among the competitors. This method is 'operational': It is based upon verifiable specifications about (i) the institutional mechanism underlying the consumnation of transactions, (ii) the content and extent of information available to market participants, and (iii) the nature of competition. It does not require an analysis of the subjective attitudes of competitors. Given the above specifications, there exist for an individual firm welldefined and statistically testable probability or transition probability functions for its sales; these are parametrized by the price offered by the firm. An actual test has been successfully performed on artificially generated data. The model of transition probability has been shown to be a probabilistic version of the 'kinked demand' theory of oligopoly. Also, the degree of stability of empirical probabilities is shown to be a reflection of the state of coordination in competition. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 01, 1944
- Accession Number
- AD0602820
Entities
People
- Dilip K. Guha
- Surojeet Sengupta
Organizations
- Case Western Reserve University