Limited knowledge of demand and oligopoly equilibria
Abstract In a standard model of oligopoly with differentiated products, the existence of an equilibrium at which the first-order conditions for profit maximisation are simultaneously satisfied for all firms is proved and this is done without imposing any restrictions on the demand functions. This is an equilibrium in the following sense: although some firms may not necessarily be maximising their profits, nevertheless if each firm's knowledge of demand is limited to the linear approximation of its own demand curve, then it will believe that it is indeed maximising its profits.