14.3 Cournot Oligopoly Model

How do oligopoly firms behave if they do not collude? The French economist and mathematician Antoine-Augustin Cournot introduced the first formal model of oligopoly in 1838. Cournot explained how oligopoly firms behave if they simultaneously choose how much they produce.

The firms act independently and have imperfect information about their rivals, so each firm must choose its output level before knowing what the other firms will choose. The quantity that one firm produces directly affects the profits of the other firms because the market price depends on total output. Thus, in choosing its strategy to maximize its profit, each firm considers its beliefs about the output its rivals will sell. Cournot introduced an ...

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