What is the Cournot model?

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Cournot model is an economic model that attempts to predict the behavior of two businesses that make up the market. This theory for the first time was the French economic theorist Antoine Augustin Cournot in the 19th century after observing the competition between two source water companies. In the Cournot, there is a variable that exists between two companies that make up the Duopol of a particular market, their output level. These companies will adjust their production level until they reach a point where they can reduce prices and maximize profits. Everyday life. The part of his work, which received the most announcements, was his model of how the companies that make up Duopolm, a model that became known as the Cournot model is expected. Duopol is a specific oligopol, in which only two companies produce exactly the same goods for one market. In addition, these two separate companies must compete and do not match each other to create a cartel.

With these characteristics on site, the Cournot also makes several assumptions about the state of this duopol. First, the structures of competing companies are known to everyone. Second, both companies choose how much amount to make what it does and make this choice simultaneously. You know it all, a lonely variable in the equation is the amount of output that every company produces, which means that it must strategize in the therms of this output.

When the mathematics of the Cournot is calculated, it will conclude that the characteristics of Duopol will fall somewhere between the monopolies and the market characteristics, which include many companies and form perfect competition. Although Duopol does not reach low prices of perfect competition, it allows a certain improvement for consumers from the monopoly, where the only company can ignore cost control. Because both companies adjust their level of output in response to themselves, these effective reactions help to achieve balance in this industry.