Assessing the Validity of Zero Conjectural Variation Hypotheses in Competition in Nigerian Sugar Industry

C. Chris Ofonyelu

Abstract


The crux of Cournot and Bertrand theory of industrial relationship is based on zero
conjectural variation in output and Prices. The two theories assume that firms form constant
expectations about their rival’s reaction during output and price competition. This study
examined the validity of zero conjectural variation hypotheses within the context of the
competition in Nigerian sugar industry. Using a two-stage least square analogy and data of
wholesale sugar prices between January 2007 and June 2014, the study examined the
interrelationships in the firms’ price and output competition. Evidence from the study showed
positive conjectural variation among the sugar firms, suggesting that output and price of rival
firms varied with competition. The strong interdependency among the sugar firms suggests a
continued long run competition and stable price in the industry.


Full Text:

PDF


DOI: https://doi.org/10.5296/rae.v6i4.6820

To make sure that you can receive messages from us, please add the 'macrothink.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.

 

Copyright © Macrothink Institute   ISSN 1948-5433