Assessing the Validity of Zero Conjectural Variation Hypotheses in Competition in Nigerian Sugar Industry
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:
PDFDOI: https://doi.org/10.5296/rae.v6i4.6820
Copyright (c) 2014 C. Chris Ofonyelu
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Research in Applied Economics ISSN 1948-5433
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