12 - Oligolopies, Nash Equilibrium

Question 1

what is the cournot model?

Answer 1

oligopoly model in which firms produce a homogenous good, each firm treats the output of its competitors as fixed, and all firms simultaneously decide how much to produce

Question 2

What is the cournot equilibriuk?

1.
2.
3.

Answer 2

• equilibrium in the cournot model in which each firm correctly assumes how much its competitor will produce and sets its own production level accordingly, to maximizie profits
• i.e. intersection of firms reaction curves
• example of a nash equilibrium

Question 3

What is a reaction curve?

Answer 3

• relationship between a firms profit maximizing iutput and the amount it thinks its competitor will produce
• Firms A´s profit-maximizing output is thus a decreasing schedule of how much it thinks Firm B will produce