| Cournot's assumption of zero conjectural variations in quantity oligopoly games has been extensively criticized in the economic literature. Recently, notions of equilibrium with nonzero conjectural variations have been suggested. With some exceptions, these notions have been defined for one shot simultaneous move games, but in such frameworks, the idea of variation or reaction to other firms' changes in output is difficult to support. In this work, nonzero conjectural variations strategies are considered in the logically consistent context of infinitely repeated games.;The analysis is then extended to the oligopoly case, still under discounting. The methods of proof developed in the duopoly theorems are adapted to the oligopoly case, with the principal results surviving intact. We are then able to view these strategies as the link between industry structure (number of firms) and performance (proximity to the competitive aggregate output). If reaction time is included as a parameter of the model, these limit results show that the degree of cooperation sustainable in (quite credible) equilibrium can be arbitrarily high, independent both of the number of firms and the annual interest rate.;We then consider the zero discount case by adopting the limit of the means evaluation relation. Full subgame perfection is demonstrated for constant conjectural variations strategies in this context.;We begin with the infinitely repeated duopoly game under discounting and demonstrate that large families of conjectural variations Nash equilibria exist, with many of these exhibiting performance which agrees with economic intuition. It is shown that aggregate output can be anywhere between that which a monopolist would prefer and the competitive industry output. A principal early result gives conditions (essentially shortened reaction times) under which these strategies are arbitrarily close to being subgame perfect. The clear interpretation is that if firms can react quickly enough to changes in rival's rate of output, then the adoption of conjectural variations strategies has strong credibility properties. |
