Cournot competition

Common card · No. 440106

Cournot competition is an economic model describing an oligopolistic market where firms simultaneously compete by choosing the quantity of goods to produce and sell in the market. It is a static game, whereby a Nash equilibrium is found where no firms desire to unilaterally change their output level when the other firms produce the output levels assigned to them in the (purported) equilibrium. This model is named after Antoine Cournot, who was inspired to develop a theoretical approach to this setting after observing firm behaviour in a spring water duopoly. The model has the following features: There is more than one firm and all firms produce a homogeneous product, i.e., there is no product differentiation; No collusion: firms do not cooperate; Firms have market power, i.e., each firm's output decision affects the good's price; The number of firms is fixed; Firms compete in quantities rather than prices; and The firms are economically rational and act strategically, usually seeking...

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