A model of

oligopoly by the

mathematician and

economist Antoine Cournot. To take the simplest case of a Cournot

duopoly, imagine there are two firms selling a particular product. Each firm decides

independently how much to produce and put on the

market. However, the market

price of the good is determined by the

inverse demand function applied to the sum of what

**both** firms put on the market.

The outcome is found applying game theory, using the Nash equilibrium concept (although Cournot did it long before Nash did). The firms in the model do not collude to get monopoly profits, but still achieve greater profits than they would in a competitive market. A nice feature of the model is that as more firms are added, the price goes to the competitive price.

Many economists believe that the Bertrand Oligopoly model is more realistic, and in that model, prices tend toward the prices of perfect competition with only two firms.