The Cournot Competition Model

The Cournot Competition Model describes a market scenario where multiple firms compete by deciding how much of a product to produce, without knowing the others' decisions in advance. Each firm chooses its output level to maximize its profit, considering how much its competitors are producing. The key idea is that each firm's optimal choice depends on the expected actions of others, leading to a balance called the Cournot equilibrium—where no firm can improve its profit by unilaterally changing its output. This model helps explain how firms strategically influence market prices and quantities in oligopolistic markets.