Per Scotchmer (2026), Cournot duopoly is a model of two firms with similar costs, selling homogenous products. The businesses try to maximise sales volume (market share) and higher prices (more profits). Whilst the Cournot model has drawbacks, the Cournot method improves both market share and profitability by defining an optimum quantity (although not Pareto optimal). The Cournot Duopoly game shows price and quantity between monopolistic levels (low output, high prices) and perfectly competitive levels (high output, low prices) (when market participants increase). Cournot provides the Nash equilibrium where no firm will deviate. (Yes, collusion is possible but it’s fragile). OPEC is considered to be a Cournot oligopoly, setting production quotas (quantity) to maximise profits and market share.
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Pareto Efficiency
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