Extending the Dorfman-Steiner Result: Conjectural Variations For 'small numbers, oligopoly firms have to make their decisions taking into account their rivals' reactions (mutual interdependence ) So the demand facing an individual firm is of the form: q= q(p,A,A) where Ar refers to the average advertising of the firms rivals. The effect aa can not be neglected. It measures the extend to which I conjecture my advertising to affect that of other firms Profits are thus I =p q(p,A,A)-C[q(p,A,A)J-A The firm maximises with respect to her own advertising, which leads to the F,0.C 歌p歌-如歌“欲“(-)款-1=0 (p-MC) (12) Multiplying the above by A/q p)(a合a全÷)-A 可 =m>0 elasticity of demand w.r.t. own advertising. m< 0 elasticity of demand w.r.t. the firms rivals advertising aA elasticity of the firm's rivals advertising w.r.t. the frm’ s own advertising So(12)becomes (p-MC)(n,+ n dividing both sides by p 二 A Here, advertising is an instrument of oligopolistic competition. We expect that when n, is negative and in absolute terms large (small numbers oligopoly), and interdependence in adverstising is high (a large n. then advertising/sales ratio will be small