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.