Cournot Economics

A detailed Summary of Cournot Economics


The basic Cournot model of oligopoly can show how product differentiation and market power can affect industry price and output. However, some "ground work" needs to be done before diving into the Cournot model with differentiation. For starters, standardized assumptions can not be used with differentiated products.

The standardized assumption is that if firm 1 undercut firm 2's price, the entire market would shift to firm 1. However, the entire market will not move from one market to the other, even if the products are relatively identical. Furthermore, any differentiation will cause fewer customers to react to prices of other, similar, goods. Suppose that a f



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, firm 1, firm 1's, product differentiation, price reaction, firm 1's price, price reaction curve, 1's price, average price, reaction curve, profit maximizing, 2's price, industry price output, 1's price reaction, firm 2's price, firm 2's,

Approximate Word count = 450
Approximate Pages = 2 (250 words per page double spaced)

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