Rational conjectures in the theory of oligopoly

The paper employs the notion of rational conjectural equilibrium to remove the arbitrary nature of conjectures about rivals' reactions which characterises the traditional non-cooperative theory of oligopoly. A general definition of these equilibria is given, and the concept is then applied to a simple duopoly model. The standard models of perfect competition, monopoly, limit-price dominant firms are shown to emerge as special cases of rational conjectural equilibria.