The stability of price adjusting oligopoly with conjectural variations

The stability of equilibrium in a price adjusting Cour not oligopoly was first analyzed by Quandt [6]. Quandt [6] and Okuguchi [3, 4, 5] analyzed the stability of equilibrium in a price adjusting oligopoly with extrapolative expectations and the one in a model with adaptive expectations, respectively. Weichhardt [7] introduced conjectural variations into a price adjusting oligopoly model to derive the stability condition for a simple case characterized by linear cost and demand functions. In this paper we shall be concerned with deriving a stability condition for a price adjusting oligopoly model with conjectural variations, assuming general cost and demand functions. Throughout the following analysis, we shall assume single-valuedness and differentiability of necessary order of the relevant functions in order to avoid mathematical intricacies. In obtaining the stability condition, we shall make use of a mathematical theorem that a contraction mapping has a unique, globally stable stationary point.