The Cournot Duopoly Model is a generalisation that describes industry constructions when more than one house ( holding considerable market power ) interacts and competes in the same market. The theoretical account assumes that if two rival houses bring forthing a homogeneous merchandise with the same cost maps ( normally treated as common cognition ) split a market. the houses will react to each other’s end product production until a province of equilibrium is reached. The theoretical account predicts that the houses will take the degree of end product traveling towards equilibrium.

If two houses produce a certain good. the net income gained is a diminishing map of the entire figure of goods that the two houses produce. Both houses are cognizant that monetary value is a diminishing map of entire end product ; therefore. each houses takes the given end product of the other in order to procure optimal net income. How one house determines its production end product and monetary values is straight affected by its rival’s decisions—if one house increases its end product or monetary values. the other house changes its end product and monetary values to fit it.

Each house attempts to maximise net incomes by taking into history the end product or monetary value determinations of the other house. Finally. both houses will hold an equal market portion where there are no inducements for altering end product determination. and will accrue merely normal net incomes. The end product will be greater than that of monopoly. but less than that of a perfect competition. and the cost of goods will be lower than that of monopoly. but non much lower than that of a perfect competition. Bibliography

Cournot duopoly. ( 2006. November 28 ) . Wikipedia. Retrieved January 9. 2007. from hypertext transfer protocol: //en. wikipedia. org/wiki/Cournot_duopoly. Kanatas. G. . & A ; Qi. J. ( 2001 ) . Imperfect Competition. Agency. and Financing Decisions [ Electronic version ] . Journal of Business. 74 ( 2 ) . 307-338. Osborne. M. J. ( 1997 ) . Cournot’s duopoly theoretical account. University of Toronto Department of Economics. Retrieved January 9. 2007. from hypertext transfer protocol: //www. economic sciences. utoronto. ca/osborne/2?3/tutorial/COURNOT. HTM.