Oligopoly
A model of oligopoly was 1st put forward by Cournot a French economist in 1838. Cournot’s
model of oligopoly is one of the oldest theories of the behaviour of the individual firm and
relate to non-collusive oligopoly. In the Cournot model it is assumed that an oligopolist
thinks that his rival will keep their output fixed regardless of what he might do.
Another important model of non-collusive oligopoly was put forward by E.H.Chamberlin in
his famous work “The theory of Monopolistic Competition”. Chamberlin made an important
improvement over the classical models of oligopoly, including that of Cournot. In sharp
contrast to Cournot Chamberlin recognised is his model that oligopoly firms recognise their
inter-dependence while fixing their output and price.
Cournot’s Duopoly Model
Augustine Cournot, a French economist, published his theory of duopoly in 1838. But it
remained mainly unnoticed till 1880 when Walras called the attention of the economists to
Cournot’s work.
Assumptions
1) Cournot takes the case of two identical mineral springs operated by two owners who are
selling the mineral water in the same market. Their waters are identical. Therefore, his model
relates to te duopoly with homogeneous products.
2) It is assumed by Cournot for the sake of simplicity that the owners operate mineral springs
and sell water without incurring any cost of production.
3) The duopolists completely know the market demand for mineral water.
4) Cournot assumes that each duopolist believes that regardless of his actions and their effect
on market price of the product, the rival firm will keep its output constant.
A model of oligopoly was 1st put forward by Cournot a French economist in 1838. Cournot’s
model of oligopoly is one of the oldest theories of the behaviour of the individual firm and
relate to non-collusive oligopoly. In the Cournot model it is assumed that an oligopolist
thinks that his rival will keep their output fixed regardless of what he might do.
Another important model of non-collusive oligopoly was put forward by E.H.Chamberlin in
his famous work “The theory of Monopolistic Competition”. Chamberlin made an important
improvement over the classical models of oligopoly, including that of Cournot. In sharp
contrast to Cournot Chamberlin recognised is his model that oligopoly firms recognise their
inter-dependence while fixing their output and price.
Cournot’s Duopoly Model
Augustine Cournot, a French economist, published his theory of duopoly in 1838. But it
remained mainly unnoticed till 1880 when Walras called the attention of the economists to
Cournot’s work.
Assumptions
1) Cournot takes the case of two identical mineral springs operated by two owners who are
selling the mineral water in the same market. Their waters are identical. Therefore, his model
relates to te duopoly with homogeneous products.
2) It is assumed by Cournot for the sake of simplicity that the owners operate mineral springs
and sell water without incurring any cost of production.
3) The duopolists completely know the market demand for mineral water.
4) Cournot assumes that each duopolist believes that regardless of his actions and their effect
on market price of the product, the rival firm will keep its output constant.
