One of the Earliest Oligopoly Models,as Explained by Augustin Cournot,took

question 60

Essay

One of the earliest oligopoly models,as explained by Augustin Cournot,took the example of two firms that produced a homogeneous product: bottled spring water.Both firms faced zero marginal costs and a linear demand curve.Using this information,show that the Cournot equilibrium output is 2/3^rd of the perfectly competitive equilibrium output.

---

Definitions:

Demand Curve

A chart that displays how the cost of an item correlates with the amount of that item buyers are prepared to buy at different price levels.

Unregulated Monopolist

A monopoly that operates without regulatory oversight, setting prices and output levels without external control.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing the financial gain in excess of the opportunity costs of resources used.

X-Inefficiency

The difference between efficient behavior of enterprises assumed or implied by economic theory and their observed behavior in practice, often due to a lack of competitive pressure.